Correlation Between Franklin Biotechnology and Templeton Developing

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

By analyzing existing cross correlation between Franklin Biotechnology Discovery and Templeton Developing Markets, you can compare the effects of market volatilities on Franklin Biotechnology and Templeton Developing 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 Biotechnology with a short position of Templeton Developing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Biotechnology and Templeton Developing.

Diversification Opportunities for Franklin Biotechnology and Templeton Developing

0.1

Correlation Coefficient

Franklin Biotechnology  Templeton Developing

Average diversification

The 3 months correlation between Franklin and Templeton is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Biotechnology Discove and Templeton Developing Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Developing and Franklin Biotechnology 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 Biotechnology Discovery are associated (or correlated) with Templeton Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Developing has no effect on the direction of Franklin Biotechnology i.e., Franklin Biotechnology and Templeton Developing go up and down completely randomly.

Pair Corralation between Franklin Biotechnology and Templeton Developing

Assuming the 90 days horizon Franklin Biotechnology is expected to generate 3.49 times less return on investment than Templeton Developing. In addition to that, Franklin Biotechnology is 1.18 times more volatile than Templeton Developing Markets. It trades about 0.03 of its total potential returns per unit of risk. Templeton Developing Markets is currently generating about 0.11 per unit of volatility. If you would invest  1,919  in Templeton Developing Markets on December 23, 2024 and sell it today you would earn a total of  129.00  from holding Templeton Developing Markets or generate 6.72% return on investment over 90 days.

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

Franklin Biotechnology Discove  vs.  Templeton Developing Markets

Franklin Biotechnology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Biotechnology Discovery are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Biotechnology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Templeton Developing

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Templeton Developing Markets are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Templeton Developing may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Franklin Biotechnology and Templeton Developing

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

The idea behind Franklin Biotechnology Discovery and Templeton Developing Markets 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.