Correlation Between Old Westbury and Franklin Equity

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

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

Diversification Opportunities for Old Westbury and Franklin Equity

0.47

Correlation Coefficient

Old Westbury  Franklin Equity

Very weak diversification

The 3 months correlation between Old and Franklin is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Old Westbury Fixed 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 Old Westbury 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 Old Westbury Fixed 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 Old Westbury i.e., Old Westbury and Franklin Equity go up and down completely randomly.

Pair Corralation between Old Westbury and Franklin Equity

Assuming the 90 days horizon Old Westbury is expected to generate 19.95 times less return on investment than Franklin Equity. But when comparing it to its historical volatility, Old Westbury Fixed is 3.25 times less risky than Franklin Equity. It trades about 0.05 of its potential returns per unit of risk. Franklin Equity Income is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  3,176  in Franklin Equity Income on October 26, 2024 and sell it today you would earn a total of  131.00  from holding Franklin Equity Income or generate 4.12% return on investment over 90 days.

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

Old Westbury Fixed  vs.  Franklin Equity Income

Old Westbury Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Old Westbury Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Old Westbury 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 Old Westbury and Franklin Equity

The main advantage of trading using opposite Old Westbury and Franklin Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Westbury 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 Old Westbury Fixed 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.