Correlation Between Cognios Market and Franklin Emerging

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

By analyzing existing cross correlation between Cognios Market Neutral and Franklin Emerging Market, you can compare the effects of market volatilities on Cognios Market and Franklin Emerging 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 Cognios Market with a short position of Franklin Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognios Market and Franklin Emerging.

Diversification Opportunities for Cognios Market and Franklin Emerging

-0.53

Correlation Coefficient

Cognios Market  Franklin Emerging

Excellent diversification

The 3 months correlation between Cognios and Franklin is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cognios Market Neutral and Franklin Emerging Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Emerging Market and Cognios Market 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 Cognios Market Neutral are associated (or correlated) with Franklin Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Emerging Market has no effect on the direction of Cognios Market i.e., Cognios Market and Franklin Emerging go up and down completely randomly.

Pair Corralation between Cognios Market and Franklin Emerging

Assuming the 90 days horizon Cognios Market Neutral is expected to under-perform the Franklin Emerging. In addition to that, Cognios Market is 1.66 times more volatile than Franklin Emerging Market. It trades about -0.08 of its total potential returns per unit of risk. Franklin Emerging Market is currently generating about 0.2 per unit of volatility. If you would invest  1,151  in Franklin Emerging Market on December 30, 2024 and sell it today you would earn a total of  29.00  from holding Franklin Emerging Market or generate 2.52% return on investment over 90 days.

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

Cognios Market Neutral  vs.  Franklin Emerging Market

Cognios Market Neutral

Risk-Adjusted Performance

Very Weak

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

Franklin Emerging Market

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Emerging Market are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Franklin Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cognios Market and Franklin Emerging

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

The idea behind Cognios Market Neutral and Franklin Emerging Market 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.