Correlation Between Franklin Resources and Peruvian Metals

Can any of the company-specific risk be diversified away by investing in both Franklin Resources and Peruvian Metals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Franklin Resources and Peruvian Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Franklin Resources and Peruvian Metals Corp, you can compare the effects of market volatilities on Franklin Resources and Peruvian Metals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Franklin Resources with a short position of Peruvian Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Resources and Peruvian Metals.

Diversification Opportunities for Franklin Resources and Peruvian Metals

-0.75

Correlation Coefficient

Franklin Resources  Peruvian Metals

Pay attention - limited upside

The 3 months correlation between Franklin and Peruvian is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Resources and Peruvian Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peruvian Metals Corp and Franklin Resources is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Franklin Resources are associated (or correlated) with Peruvian Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peruvian Metals Corp has no effect on the direction of Franklin Resources i.e., Franklin Resources and Peruvian Metals go up and down completely randomly.

Pair Corralation between Franklin Resources and Peruvian Metals

Considering the 90-day investment horizon Franklin Resources is expected to under-perform the Peruvian Metals. But the stock apears to be less risky and, when comparing its historical volatility, Franklin Resources is 4.32 times less risky than Peruvian Metals. The stock trades about -0.01 of its potential returns per unit of risk. The Peruvian Metals Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5.21  in Peruvian Metals Corp on October 9, 2024 and sell it today you would lose (3.78) from holding Peruvian Metals Corp or give up 72.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Franklin Resources  vs.  Peruvian Metals Corp

Franklin Resources

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Franklin Resources is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Peruvian Metals Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Peruvian Metals Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Peruvian Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin Resources and Peruvian Metals

The main advantage of trading using opposite Franklin Resources and Peruvian Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Resources position performs unexpectedly, Peruvian Metals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Peruvian Metals will offset losses from the drop in Peruvian Metals' long position.

The idea behind Franklin Resources and Peruvian Metals Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.