Correlation Between Franklin Financial and CNB Financial

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

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

Diversification Opportunities for Franklin Financial and CNB Financial

0.1

Correlation Coefficient

Franklin Financial  CNB Financial

Average diversification

The 3 months correlation between Franklin and CNB is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Financial Services and CNB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNB Financial and Franklin Financial 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 Financial Services are associated (or correlated) with CNB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNB Financial has no effect on the direction of Franklin Financial i.e., Franklin Financial and CNB Financial go up and down completely randomly.

Pair Corralation between Franklin Financial and CNB Financial

Given the investment horizon of 90 days Franklin Financial Services is expected to generate 1.32 times more return on investment than CNB Financial. However, Franklin Financial is 1.32 times more volatile than CNB Financial. It trades about 0.13 of its potential returns per unit of risk. CNB Financial is currently generating about -0.12 per unit of risk. If you would invest  3,167  in Franklin Financial Services on December 19, 2024 and sell it today you would earn a total of  423.00  from holding Franklin Financial Services or generate 13.36% return on investment over 90 days.

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

Franklin Financial Services  vs.  CNB Financial

Franklin Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Financial Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Franklin Financial reported solid returns over the last few months and may actually be approaching a breakup point.

CNB Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days CNB Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Franklin Financial and CNB Financial

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

The idea behind Franklin Financial Services and CNB Financial 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 Transaction History module to view history of all your transactions and understand their impact on performance.