Correlation Between Franklin BSP and Chicago Atlantic

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

By analyzing existing cross correlation between Franklin BSP Realty and Chicago Atlantic Real, you can compare the effects of market volatilities on Franklin BSP and Chicago Atlantic 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 BSP with a short position of Chicago Atlantic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin BSP and Chicago Atlantic.

Diversification Opportunities for Franklin BSP and Chicago Atlantic

0.06

Correlation Coefficient

Franklin BSP  Chicago Atlantic

Significant diversification

The 3 months correlation between Franklin and Chicago is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Franklin BSP Realty and Chicago Atlantic Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chicago Atlantic Real and Franklin BSP 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 BSP Realty are associated (or correlated) with Chicago Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chicago Atlantic Real has no effect on the direction of Franklin BSP i.e., Franklin BSP and Chicago Atlantic go up and down completely randomly.

Pair Corralation between Franklin BSP and Chicago Atlantic

Given the investment horizon of 90 days Franklin BSP is expected to generate 1.53 times less return on investment than Chicago Atlantic. In addition to that, Franklin BSP is 1.33 times more volatile than Chicago Atlantic Real. It trades about 0.03 of its total potential returns per unit of risk. Chicago Atlantic Real is currently generating about 0.06 per unit of volatility. If you would invest  1,172  in Chicago Atlantic Real on September 14, 2024 and sell it today you would earn a total of  443.50  from holding Chicago Atlantic Real or generate 37.84% return on investment over 90 days.

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

Franklin BSP Realty  vs.  Chicago Atlantic Real

Franklin BSP Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin BSP Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Franklin BSP is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Chicago Atlantic Real

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chicago Atlantic Real are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Chicago Atlantic is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Franklin BSP and Chicago Atlantic

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

The idea behind Franklin BSP Realty and Chicago Atlantic Real 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.