Correlation Between Franklin and Great West

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

By analyzing existing cross correlation between Franklin Government Money and Great West Sp 500, you can compare the effects of market volatilities on Franklin and Great West 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 with a short position of Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin and Great West.

Diversification Opportunities for Franklin and Great West

0.48

Correlation Coefficient

Franklin  Great West

Very weak diversification

The 3 months correlation between Franklin and Great is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Great West Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Sp and Franklin 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 Government Money are associated (or correlated) with Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Sp has no effect on the direction of Franklin i.e., Franklin and Great West go up and down completely randomly.

Pair Corralation between Franklin and Great West

Assuming the 90 days horizon Franklin Government Money is expected to under-perform the Great West. In addition to that, Franklin is 4.3 times more volatile than Great West Sp 500. It trades about -0.04 of its total potential returns per unit of risk. Great West Sp 500 is currently generating about 0.09 per unit of volatility. If you would invest  2,711  in Great West Sp 500 on October 26, 2024 and sell it today you would earn a total of  1,193  from holding Great West Sp 500 or generate 44.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Franklin Government Money  vs.  Great West Sp 500

Franklin Government Money

Risk-Adjusted Performance

0 of 100

Very Weak

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

Great West Sp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Sp 500 are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Great West 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 and Great West

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

The idea behind Franklin Government Money and Great West Sp 500 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 Stocks Directory module to find actively traded stocks across global markets.