Correlation Between Old Westbury and Franklin High

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

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

Diversification Opportunities for Old Westbury and Franklin High

0.58

Correlation Coefficient

Old Westbury  Franklin High

Very weak diversification

The 3 months correlation between Old and Franklin is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Old Westbury Large and Franklin High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin High 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 Large are associated (or correlated) with Franklin High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin High Income has no effect on the direction of Old Westbury i.e., Old Westbury and Franklin High go up and down completely randomly.

Pair Corralation between Old Westbury and Franklin High

Assuming the 90 days horizon Old Westbury Large is expected to generate 2.73 times more return on investment than Franklin High. However, Old Westbury is 2.73 times more volatile than Franklin High Income. It trades about 0.12 of its potential returns per unit of risk. Franklin High Income is currently generating about 0.14 per unit of risk. If you would invest  1,725  in Old Westbury Large on September 13, 2024 and sell it today you would earn a total of  426.00  from holding Old Westbury Large or generate 24.7% return on investment over 90 days.

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

Old Westbury Large  vs.  Franklin High Income

Old Westbury Large

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Old Westbury Large are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 High Income

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin High Income are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Franklin High 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 High

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

The idea behind Old Westbury Large and Franklin High 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.