Correlation Between Franklin Gold and Invesco Energy

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

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

Diversification Opportunities for Franklin Gold and Invesco Energy

0.09

Correlation Coefficient

Franklin Gold  Invesco Energy

Significant diversification

The 3 months correlation between Franklin and Invesco is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Gold Precious and Invesco Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Energy and Franklin Gold 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 Gold Precious are associated (or correlated) with Invesco Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Energy has no effect on the direction of Franklin Gold i.e., Franklin Gold and Invesco Energy go up and down completely randomly.

Pair Corralation between Franklin Gold and Invesco Energy

Assuming the 90 days horizon Franklin Gold Precious is expected to under-perform the Invesco Energy. In addition to that, Franklin Gold is 1.8 times more volatile than Invesco Energy Fund. It trades about -0.13 of its total potential returns per unit of risk. Invesco Energy Fund is currently generating about 0.09 per unit of volatility. If you would invest  2,416  in Invesco Energy Fund on October 21, 2024 and sell it today you would earn a total of  122.00  from holding Invesco Energy Fund or generate 5.05% return on investment over 90 days.

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

Franklin Gold Precious  vs.  Invesco Energy Fund

Franklin Gold Precious

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Gold Precious 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.

Invesco Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Energy Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Invesco Energy 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 Gold and Invesco Energy

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

The idea behind Franklin Gold Precious and Invesco Energy Fund 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.