Correlation Between Alphabet and Franklin Dynatech

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

By analyzing existing cross correlation between Alphabet Inc Class C and Franklin Dynatech Fund, you can compare the effects of market volatilities on Alphabet and Franklin Dynatech 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 Alphabet with a short position of Franklin Dynatech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Franklin Dynatech.

Diversification Opportunities for Alphabet and Franklin Dynatech

0.73

Correlation Coefficient

Alphabet  Franklin Dynatech

Poor diversification

The 3 months correlation between Alphabet and Franklin is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Franklin Dynatech Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Dynatech and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Franklin Dynatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Dynatech has no effect on the direction of Alphabet i.e., Alphabet and Franklin Dynatech go up and down completely randomly.

Pair Corralation between Alphabet and Franklin Dynatech

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.9 times more return on investment than Franklin Dynatech. However, Alphabet Inc Class C is 1.11 times less risky than Franklin Dynatech. It trades about -0.12 of its potential returns per unit of risk. Franklin Dynatech Fund is currently generating about -0.19 per unit of risk. If you would invest  19,816  in Alphabet Inc Class C on October 16, 2024 and sell it today you would lose (611.00) from holding Alphabet Inc Class C or give up 3.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Alphabet Inc Class C  vs.  Franklin Dynatech Fund

Alphabet Class C

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Franklin Dynatech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Dynatech Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Dynatech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Franklin Dynatech

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

The idea behind Alphabet Inc Class C and Franklin Dynatech Fund 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.