Correlation Between Franklin Equity and Siit Equity

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

Diversification Opportunities for Franklin Equity and Siit Equity

0.89

Correlation Coefficient

Franklin Equity  Siit Equity

Very poor diversification

The 3 months correlation between Franklin and Siit is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Equity Income and Siit Equity Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siit Equity Factor 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 Siit Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siit Equity Factor has no effect on the direction of Franklin Equity i.e., Franklin Equity and Siit Equity go up and down completely randomly.

Pair Corralation between Franklin Equity and Siit Equity

Assuming the 90 days horizon Franklin Equity Income is expected to generate 0.95 times more return on investment than Siit Equity. However, Franklin Equity Income is 1.05 times less risky than Siit Equity. It trades about 0.35 of its potential returns per unit of risk. Siit Equity Factor is currently generating about 0.16 per unit of risk. If you would invest  3,142  in Franklin Equity Income on October 24, 2024 and sell it today you would earn a total of  147.00  from holding Franklin Equity Income or generate 4.68% return on investment over 90 days.

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

Franklin Equity Income  vs.  Siit Equity Factor

Franklin Equity Income

Risk-Adjusted Performance

0 of 100

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.

Siit Equity Factor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siit Equity Factor has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Siit Equity 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 Siit Equity

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

The idea behind Franklin Equity Income and Siit Equity Factor 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.