Correlation Between Franklin FTSE and Enbridge

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

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

Diversification Opportunities for Franklin FTSE and Enbridge

0.48

Correlation Coefficient

Franklin FTSE  Enbridge

Very weak diversification

The 3 months correlation between Franklin and Enbridge is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Franklin FTSE Brazil and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Franklin FTSE 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 FTSE Brazil are associated (or correlated) with Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of Franklin FTSE i.e., Franklin FTSE and Enbridge go up and down completely randomly.

Pair Corralation between Franklin FTSE and Enbridge

Assuming the 90 days trading horizon Franklin FTSE is expected to generate 1.76 times less return on investment than Enbridge. But when comparing it to its historical volatility, Franklin FTSE Brazil is 1.15 times less risky than Enbridge. It trades about 0.03 of its potential returns per unit of risk. Enbridge is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,953  in Enbridge on December 2, 2024 and sell it today you would earn a total of  145.00  from holding Enbridge or generate 2.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	66.67%
Values	Daily Returns

Franklin FTSE Brazil  vs.  Enbridge

Franklin FTSE Brazil

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin FTSE Brazil are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Franklin FTSE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Enbridge

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Enbridge is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Franklin FTSE and Enbridge

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

The idea behind Franklin FTSE Brazil and Enbridge 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.