Correlation Between E Fixed and Franklin Natural

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

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

Diversification Opportunities for E Fixed and Franklin Natural

0.37

Correlation Coefficient

E Fixed  Franklin Natural

Weak diversification

The 3 months correlation between HCIIX and Franklin is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding The E Fixed and Franklin Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Natural Res and E Fixed 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 The E Fixed are associated (or correlated) with Franklin Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Natural Res has no effect on the direction of E Fixed i.e., E Fixed and Franklin Natural go up and down completely randomly.

Pair Corralation between E Fixed and Franklin Natural

Assuming the 90 days horizon The E Fixed is expected to generate 0.27 times more return on investment than Franklin Natural. However, The E Fixed is 3.76 times less risky than Franklin Natural. It trades about -0.12 of its potential returns per unit of risk. Franklin Natural Resources is currently generating about -0.18 per unit of risk. If you would invest  856.00  in The E Fixed on September 27, 2024 and sell it today you would lose (12.00) from holding The E Fixed or give up 1.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

The E Fixed  vs.  Franklin Natural Resources

E Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The E Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, E Fixed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Natural Res

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Natural Resources has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with E Fixed and Franklin Natural

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

The idea behind The E Fixed and Franklin Natural Resources 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.