Correlation Between Franklin Biotechnology and Eaton Vance

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

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

Diversification Opportunities for Franklin Biotechnology and Eaton Vance

0.6

Correlation Coefficient

Franklin Biotechnology  Eaton Vance

Poor diversification

The 3 months correlation between Franklin and Eaton is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Biotechnology Discove and Eaton Vance Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Government and Franklin Biotechnology 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 Biotechnology Discovery are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Government has no effect on the direction of Franklin Biotechnology i.e., Franklin Biotechnology and Eaton Vance go up and down completely randomly.

Pair Corralation between Franklin Biotechnology and Eaton Vance

Assuming the 90 days horizon Franklin Biotechnology Discovery is expected to generate 2.84 times more return on investment than Eaton Vance. However, Franklin Biotechnology is 2.84 times more volatile than Eaton Vance Government. It trades about 0.04 of its potential returns per unit of risk. Eaton Vance Government is currently generating about 0.03 per unit of risk. If you would invest  11,015  in Franklin Biotechnology Discovery on October 21, 2024 and sell it today you would earn a total of  1,713  from holding Franklin Biotechnology Discovery or generate 15.55% return on investment over 90 days.

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

Franklin Biotechnology Discove  vs.  Eaton Vance Government

Franklin Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Biotechnology Discovery 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 basic 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.

Eaton Vance Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaton Vance Government has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Eaton Vance 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 Biotechnology and Eaton Vance

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

The idea behind Franklin Biotechnology Discovery and Eaton Vance Government 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.