Correlation Between Franklin FTSE and Ithaca Energy

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

Diversification Opportunities for Franklin FTSE and Ithaca Energy

0.48

Correlation Coefficient

Franklin FTSE  Ithaca Energy

Very weak diversification

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

Pair Corralation between Franklin FTSE and Ithaca Energy

Assuming the 90 days trading horizon Franklin FTSE Brazil is expected to generate 0.37 times more return on investment than Ithaca Energy. However, Franklin FTSE Brazil is 2.72 times less risky than Ithaca Energy. It trades about -0.11 of its potential returns per unit of risk. Ithaca Energy PLC is currently generating about -0.08 per unit of risk. If you would invest  1,911  in Franklin FTSE Brazil on September 2, 2024 and sell it today you would lose (176.00) from holding Franklin FTSE Brazil or give up 9.21% of portfolio value over 90 days.

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

Franklin FTSE Brazil  vs.  Ithaca Energy PLC

Franklin FTSE Brazil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin FTSE Brazil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Ithaca Energy PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ithaca Energy PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Franklin FTSE and Ithaca Energy

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

The idea behind Franklin FTSE Brazil and Ithaca Energy PLC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.