Correlation Between Real Estate and Franklin Convertible

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

By analyzing existing cross correlation between Real Estate Ultrasector and Franklin Vertible Securities, you can compare the effects of market volatilities on Real Estate and Franklin Convertible 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 Real Estate with a short position of Franklin Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Estate and Franklin Convertible.

Diversification Opportunities for Real Estate and Franklin Convertible

-0.18

Correlation Coefficient

Real Estate  Franklin Convertible

Good diversification

The 3 months correlation between Real and Franklin is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Ultrasector and Franklin Vertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Convertible and Real Estate 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 Real Estate Ultrasector are associated (or correlated) with Franklin Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Convertible has no effect on the direction of Real Estate i.e., Real Estate and Franklin Convertible go up and down completely randomly.

Pair Corralation between Real Estate and Franklin Convertible

Assuming the 90 days horizon Real Estate is expected to generate 2.19 times less return on investment than Franklin Convertible. In addition to that, Real Estate is 3.09 times more volatile than Franklin Vertible Securities. It trades about 0.06 of its total potential returns per unit of risk. Franklin Vertible Securities is currently generating about 0.42 per unit of volatility. If you would invest  2,198  in Franklin Vertible Securities on September 5, 2024 and sell it today you would earn a total of  294.00  from holding Franklin Vertible Securities or generate 13.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Real Estate Ultrasector  vs.  Franklin Vertible Securities

Real Estate Ultrasector

Risk-Adjusted Performance

4 of 100

Insignificant

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

Franklin Convertible

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Vertible Securities are ranked lower than 32 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Franklin Convertible may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Real Estate and Franklin Convertible

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

The idea behind Real Estate Ultrasector and Franklin Vertible Securities 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.