Correlation Between Franklin New and The Gold

Can any of the company-specific risk be diversified away by investing in both Franklin New and The Gold 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 The Gold 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 The Gold Bullion, you can compare the effects of market volatilities on Franklin New and The Gold 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 The Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin New and The Gold.

Diversification Opportunities for Franklin New and The Gold

0.22

Correlation Coefficient

Franklin New  The Gold

Modest diversification

The 3 months correlation between Franklin and The is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Franklin New York and The Gold Bullion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Bullion 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 The Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Bullion has no effect on the direction of Franklin New i.e., Franklin New and The Gold go up and down completely randomly.

Pair Corralation between Franklin New and The Gold

Assuming the 90 days horizon Franklin New is expected to generate 3.0 times less return on investment than The Gold. But when comparing it to its historical volatility, Franklin New York is 9.55 times less risky than The Gold. It trades about 0.03 of its potential returns per unit of risk. The Gold Bullion is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,011  in The Gold Bullion on October 9, 2024 and sell it today you would lose (9.00) from holding The Gold Bullion or give up 0.45% of portfolio value over 90 days.

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

Franklin New York  vs.  The Gold Bullion

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 basic indicators, Franklin New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gold Bullion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gold Bullion 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 fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Franklin New and The Gold

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

The idea behind Franklin New York and The Gold Bullion 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.