Correlation Between Franklin New and Fidelity Managed

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

By analyzing existing cross correlation between Franklin New York and Fidelity Managed Retirement, you can compare the effects of market volatilities on Franklin New and Fidelity Managed 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 New with a short position of Fidelity Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin New and Fidelity Managed.

Diversification Opportunities for Franklin New and Fidelity Managed

0.71

Correlation Coefficient

Franklin New  Fidelity Managed

Poor diversification

The 3 months correlation between Franklin and Fidelity is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Franklin New York and Fidelity Managed Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Managed Ret and Franklin New 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 New York are associated (or correlated) with Fidelity Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Managed Ret has no effect on the direction of Franklin New i.e., Franklin New and Fidelity Managed go up and down completely randomly.

Pair Corralation between Franklin New and Fidelity Managed

Assuming the 90 days horizon Franklin New York is expected to generate 0.42 times more return on investment than Fidelity Managed. However, Franklin New York is 2.36 times less risky than Fidelity Managed. It trades about -0.34 of its potential returns per unit of risk. Fidelity Managed Retirement is currently generating about -0.41 per unit of risk. If you would invest  1,088  in Franklin New York on October 8, 2024 and sell it today you would lose (14.00) from holding Franklin New York or give up 1.29% of portfolio value over 90 days.

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

Franklin New York  vs.  Fidelity Managed Retirement

Franklin New York

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fidelity Managed Ret

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Managed Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Managed 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 New and Fidelity Managed

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

The idea behind Franklin New York and Fidelity Managed Retirement 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.