Correlation Between Franklin Financial and Dah Sing

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

Diversification Opportunities for Franklin Financial and Dah Sing

0.26

Correlation Coefficient

Franklin Financial  Dah Sing

Modest diversification

The 3 months correlation between Franklin and Dah is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Financial Services and Dah Sing Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dah Sing 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 Dah Sing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dah Sing Financial has no effect on the direction of Franklin Financial i.e., Franklin Financial and Dah Sing go up and down completely randomly.

Pair Corralation between Franklin Financial and Dah Sing

Given the investment horizon of 90 days Franklin Financial Services is expected to under-perform the Dah Sing. But the stock apears to be less risky and, when comparing its historical volatility, Franklin Financial Services is 1.21 times less risky than Dah Sing. The stock trades about -0.38 of its potential returns per unit of risk. The Dah Sing Financial is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  952.00  in Dah Sing Financial on September 25, 2024 and sell it today you would earn a total of  88.00  from holding Dah Sing Financial or generate 9.24% return on investment over 90 days.

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

Franklin Financial Services  vs.  Dah Sing Financial

Franklin Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Financial Services are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Franklin Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Dah Sing Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dah Sing Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Dah Sing showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin Financial and Dah Sing

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

The idea behind Franklin Financial Services and Dah Sing 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.