Correlation Between Franklin Natural and Harbor International

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

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

Diversification Opportunities for Franklin Natural and Harbor International

0.34

Correlation Coefficient

Franklin Natural  Harbor International

Weak diversification

The 3 months correlation between Franklin and Harbor is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Natural Resources and Harbor International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor International and Franklin Natural 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 Natural Resources are associated (or correlated) with Harbor International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor International has no effect on the direction of Franklin Natural i.e., Franklin Natural and Harbor International go up and down completely randomly.

Pair Corralation between Franklin Natural and Harbor International

Assuming the 90 days horizon Franklin Natural Resources is expected to under-perform the Harbor International. In addition to that, Franklin Natural is 1.48 times more volatile than Harbor International Fund. It trades about -0.08 of its total potential returns per unit of risk. Harbor International Fund is currently generating about 0.09 per unit of volatility. If you would invest  4,559  in Harbor International Fund on November 29, 2024 and sell it today you would earn a total of  172.00  from holding Harbor International Fund or generate 3.77% return on investment over 90 days.

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

Franklin Natural Resources  vs.  Harbor International Fund

Franklin Natural Res

Risk-Adjusted Performance

Very Weak

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

Harbor International

Risk-Adjusted Performance

OK

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

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

The idea behind Franklin Natural Resources and Harbor International 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.