Correlation Between Franklin Templeton and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both Franklin Templeton and Diamond Hill 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 Templeton and Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Templeton Limited and Diamond Hill Investment, you can compare the effects of market volatilities on Franklin Templeton and Diamond Hill 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 Templeton with a short position of Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Templeton and Diamond Hill.
Diversification Opportunities for Franklin Templeton and Diamond Hill
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Franklin and Diamond is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Templeton Limited and Diamond Hill Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Investment and Franklin Templeton 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 Templeton Limited are associated (or correlated) with Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Investment has no effect on the direction of Franklin Templeton i.e., Franklin Templeton and Diamond Hill go up and down completely randomly.
Pair Corralation between Franklin Templeton and Diamond Hill
Considering the 90-day investment horizon Franklin Templeton is expected to generate 3.13 times less return on investment than Diamond Hill. But when comparing it to its historical volatility, Franklin Templeton Limited is 3.74 times less risky than Diamond Hill. It trades about 0.12 of its potential returns per unit of risk. Diamond Hill Investment is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 15,083 in Diamond Hill Investment on September 6, 2024 and sell it today you would earn a total of 1,564 from holding Diamond Hill Investment or generate 10.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Franklin Templeton Limited vs. Diamond Hill Investment
Performance |
Timeline |
Franklin Templeton |
Diamond Hill Investment |
Franklin Templeton and Diamond Hill Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Franklin Templeton and Diamond Hill
The main advantage of trading using opposite Franklin Templeton and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Templeton position performs unexpectedly, Diamond Hill 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 Diamond Hill will offset losses from the drop in Diamond Hill's long position.Franklin Templeton vs. MFS Investment Grade | Franklin Templeton vs. Invesco High Income | Franklin Templeton vs. Eaton Vance National | Franklin Templeton vs. Rivernorth Opportunistic Municipalome |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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