Correlation Between Franklin Equity and Mainstay High

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

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

Diversification Opportunities for Franklin Equity and Mainstay High

0.14

Correlation Coefficient

Franklin Equity  Mainstay High

Average diversification

The 3 months correlation between Franklin and Mainstay is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Equity Income and Mainstay High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay High Yield and Franklin Equity 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 Equity Income are associated (or correlated) with Mainstay High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay High Yield has no effect on the direction of Franklin Equity i.e., Franklin Equity and Mainstay High go up and down completely randomly.

Pair Corralation between Franklin Equity and Mainstay High

Assuming the 90 days horizon Franklin Equity Income is expected to under-perform the Mainstay High. In addition to that, Franklin Equity is 2.99 times more volatile than Mainstay High Yield. It trades about -0.01 of its total potential returns per unit of risk. Mainstay High Yield is currently generating about 0.07 per unit of volatility. If you would invest  1,169  in Mainstay High Yield on December 22, 2024 and sell it today you would earn a total of  12.00  from holding Mainstay High Yield or generate 1.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Franklin Equity Income  vs.  Mainstay High Yield

Franklin Equity Income

Risk-Adjusted Performance

Very Weak

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

Mainstay High Yield

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay High Yield are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mainstay High 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 Equity and Mainstay High

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

The idea behind Franklin Equity Income and Mainstay High Yield 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.