Correlation Between Johcm International and Franklin Equity

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

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

Diversification Opportunities for Johcm International and Franklin Equity

0.59

Correlation Coefficient

Johcm International  Franklin Equity

Very weak diversification

The 3 months correlation between Johcm and Franklin is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Johcm International Select and Franklin Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Equity Income and Johcm International 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 Johcm International Select are associated (or correlated) with Franklin Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Equity Income has no effect on the direction of Johcm International i.e., Johcm International and Franklin Equity go up and down completely randomly.

Pair Corralation between Johcm International and Franklin Equity

Assuming the 90 days horizon Johcm International is expected to generate 1.34 times less return on investment than Franklin Equity. In addition to that, Johcm International is 1.12 times more volatile than Franklin Equity Income. It trades about 0.03 of its total potential returns per unit of risk. Franklin Equity Income is currently generating about 0.05 per unit of volatility. If you would invest  2,787  in Franklin Equity Income on October 25, 2024 and sell it today you would earn a total of  493.00  from holding Franklin Equity Income or generate 17.69% return on investment over 90 days.

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

Johcm International Select  vs.  Franklin Equity Income

Johcm International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Franklin Equity Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Johcm International and Franklin Equity

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

The idea behind Johcm International Select and Franklin Equity Income 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 Global Correlations module to find global opportunities by holding instruments from different markets.