Correlation Between Franklin International and WBI Power

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

By analyzing existing cross correlation between Franklin International Core and WBI Power Factor, you can compare the effects of market volatilities on Franklin International and WBI Power 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 International with a short position of WBI Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin International and WBI Power.

Diversification Opportunities for Franklin International and WBI Power

0.39

Correlation Coefficient

Franklin International  WBI Power

Weak diversification

The 3 months correlation between Franklin and WBI is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Franklin International Core and WBI Power Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WBI Power Factor and Franklin International 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 International Core are associated (or correlated) with WBI Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WBI Power Factor has no effect on the direction of Franklin International i.e., Franklin International and WBI Power go up and down completely randomly.

Pair Corralation between Franklin International and WBI Power

Given the investment horizon of 90 days Franklin International Core is expected to generate 0.97 times more return on investment than WBI Power. However, Franklin International Core is 1.03 times less risky than WBI Power. It trades about 0.25 of its potential returns per unit of risk. WBI Power Factor is currently generating about 0.1 per unit of risk. If you would invest  3,009  in Franklin International Core on October 25, 2024 and sell it today you would earn a total of  100.00  from holding Franklin International Core or generate 3.32% return on investment over 90 days.

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

Franklin International Core  vs.  WBI Power Factor

Franklin International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin International Core has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Franklin International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

WBI Power Factor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Franklin International and WBI Power

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

The idea behind Franklin International Core and WBI Power Factor 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.