Correlation Between Buffalo High and Franklin Mutual

Can any of the company-specific risk be diversified away by investing in both Buffalo High and Franklin Mutual 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 Buffalo High and Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Buffalo High Yield and Franklin Mutual Quest, you can compare the effects of market volatilities on Buffalo High and Franklin Mutual 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 Buffalo High with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Buffalo High and Franklin Mutual.

Diversification Opportunities for Buffalo High and Franklin Mutual

0.52

Correlation Coefficient

Buffalo High  Franklin Mutual

Very weak diversification

The 3 months correlation between Buffalo and Franklin is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Buffalo High Yield and Franklin Mutual Quest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Quest and Buffalo High 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 Buffalo High Yield are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Quest has no effect on the direction of Buffalo High i.e., Buffalo High and Franklin Mutual go up and down completely randomly.

Pair Corralation between Buffalo High and Franklin Mutual

Assuming the 90 days horizon Buffalo High Yield is expected to generate 0.26 times more return on investment than Franklin Mutual. However, Buffalo High Yield is 3.79 times less risky than Franklin Mutual. It trades about 0.21 of its potential returns per unit of risk. Franklin Mutual Quest is currently generating about 0.04 per unit of risk. If you would invest  904.00  in Buffalo High Yield on September 29, 2024 and sell it today you would earn a total of  168.00  from holding Buffalo High Yield or generate 18.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Buffalo High Yield  vs.  Franklin Mutual Quest

Buffalo High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Buffalo High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Buffalo High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Mutual Quest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Mutual Quest has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Buffalo High and Franklin Mutual

The main advantage of trading using opposite Buffalo High and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Buffalo High position performs unexpectedly, Franklin Mutual 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 Franklin Mutual will offset losses from the drop in Franklin Mutual's long position.

The idea behind Buffalo High Yield and Franklin Mutual Quest 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.