Correlation Between Ariel Appreciation and Franklin Gold

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

By analyzing existing cross correlation between Ariel Appreciation Fund and Franklin Gold Precious, you can compare the effects of market volatilities on Ariel Appreciation and Franklin Gold 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 Ariel Appreciation with a short position of Franklin Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ariel Appreciation and Franklin Gold.

Diversification Opportunities for Ariel Appreciation and Franklin Gold

0.43

Correlation Coefficient

Ariel Appreciation  Franklin Gold

Very weak diversification

The 3 months correlation between Ariel and Franklin is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ariel Appreciation Fund and Franklin Gold Precious in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Gold Precious and Ariel Appreciation 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 Ariel Appreciation Fund are associated (or correlated) with Franklin Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Gold Precious has no effect on the direction of Ariel Appreciation i.e., Ariel Appreciation and Franklin Gold go up and down completely randomly.

Pair Corralation between Ariel Appreciation and Franklin Gold

Assuming the 90 days horizon Ariel Appreciation Fund is expected to generate 0.88 times more return on investment than Franklin Gold. However, Ariel Appreciation Fund is 1.14 times less risky than Franklin Gold. It trades about -0.03 of its potential returns per unit of risk. Franklin Gold Precious is currently generating about -0.07 per unit of risk. If you would invest  4,230  in Ariel Appreciation Fund on October 27, 2024 and sell it today you would lose (127.00) from holding Ariel Appreciation Fund or give up 3.0% of portfolio value over 90 days.

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

Ariel Appreciation Fund  vs.  Franklin Gold Precious

Ariel Appreciation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Franklin Gold Precious

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Gold Precious has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Ariel Appreciation and Franklin Gold

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

The idea behind Ariel Appreciation Fund and Franklin Gold Precious 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.