Correlation Between Franklin Dynatech and First Trust

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

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

Diversification Opportunities for Franklin Dynatech and First Trust

0.29

Correlation Coefficient

Franklin Dynatech  First Trust

Modest diversification

The 3 months correlation between Franklin and First is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Dynatech Fund and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and Franklin Dynatech 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 Dynatech Fund are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Short has no effect on the direction of Franklin Dynatech i.e., Franklin Dynatech and First Trust go up and down completely randomly.

Pair Corralation between Franklin Dynatech and First Trust

Assuming the 90 days horizon Franklin Dynatech Fund is expected to under-perform the First Trust. In addition to that, Franklin Dynatech is 10.55 times more volatile than First Trust Short. It trades about -0.11 of its total potential returns per unit of risk. First Trust Short is currently generating about 0.04 per unit of volatility. If you would invest  1,772  in First Trust Short on December 28, 2024 and sell it today you would earn a total of  8.00  from holding First Trust Short or generate 0.45% return on investment over 90 days.

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

Franklin Dynatech Fund  vs.  First Trust Short

Franklin Dynatech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Dynatech Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

First Trust Short

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Short are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, First Trust 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 Dynatech and First Trust

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

The idea behind Franklin Dynatech Fund and First Trust Short 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.