Correlation Between Franklin Gold and L Abbett

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

Diversification Opportunities for Franklin Gold and L Abbett

0.15

Correlation Coefficient

Franklin Gold  L Abbett

Average diversification

The 3 months correlation between Franklin and LAVVX is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Gold Precious and L Abbett Fundamental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Abbett Fundamental 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 L Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Abbett Fundamental has no effect on the direction of Franklin Gold i.e., Franklin Gold and L Abbett go up and down completely randomly.

Pair Corralation between Franklin Gold and L Abbett

Assuming the 90 days horizon Franklin Gold Precious is expected to generate 1.98 times more return on investment than L Abbett. However, Franklin Gold is 1.98 times more volatile than L Abbett Fundamental. It trades about 0.33 of its potential returns per unit of risk. L Abbett Fundamental is currently generating about 0.01 per unit of risk. If you would invest  1,505  in Franklin Gold Precious on December 21, 2024 and sell it today you would earn a total of  545.00  from holding Franklin Gold Precious or generate 36.21% 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.  L Abbett Fundamental

Franklin Gold Precious

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Gold Precious are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Franklin Gold showed solid returns over the last few months and may actually be approaching a breakup point.

L Abbett Fundamental

Risk-Adjusted Performance

Weak

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

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

The idea behind Franklin Gold Precious and L Abbett Fundamental 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.