Correlation Between Franklin Natural and Deutsche Croci

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

Diversification Opportunities for Franklin Natural and Deutsche Croci

0.63

Correlation Coefficient

Franklin Natural  Deutsche Croci

Poor diversification

The 3 months correlation between Franklin and Deutsche is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Natural Resources and Deutsche Croci Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Croci Equity 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 Deutsche Croci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Croci Equity has no effect on the direction of Franklin Natural i.e., Franklin Natural and Deutsche Croci go up and down completely randomly.

Pair Corralation between Franklin Natural and Deutsche Croci

Assuming the 90 days horizon Franklin Natural Resources is expected to generate 0.93 times more return on investment than Deutsche Croci. However, Franklin Natural Resources is 1.08 times less risky than Deutsche Croci. It trades about -0.07 of its potential returns per unit of risk. Deutsche Croci Equity is currently generating about -0.1 per unit of risk. If you would invest  3,089  in Franklin Natural Resources on December 3, 2024 and sell it today you would lose (144.00) from holding Franklin Natural Resources or give up 4.66% of portfolio value over 90 days.

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

Franklin Natural Resources  vs.  Deutsche Croci Equity

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.

Deutsche Croci Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deutsche Croci Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Franklin Natural and Deutsche Croci

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

The idea behind Franklin Natural Resources and Deutsche Croci Equity 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.