Correlation Between Americafirst Large and Franklin Real

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

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

Diversification Opportunities for Americafirst Large and Franklin Real

-0.25

Correlation Coefficient

Americafirst Large  Franklin Real

Very good diversification

The 3 months correlation between Americafirst and Franklin is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Americafirst Large Cap and Franklin Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Real Estate and Americafirst Large 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 Americafirst Large Cap are associated (or correlated) with Franklin Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Real Estate has no effect on the direction of Americafirst Large i.e., Americafirst Large and Franklin Real go up and down completely randomly.

Pair Corralation between Americafirst Large and Franklin Real

Assuming the 90 days horizon Americafirst Large Cap is expected to generate 0.99 times more return on investment than Franklin Real. However, Americafirst Large Cap is 1.01 times less risky than Franklin Real. It trades about 0.22 of its potential returns per unit of risk. Franklin Real Estate is currently generating about -0.05 per unit of risk. If you would invest  1,344  in Americafirst Large Cap on September 12, 2024 and sell it today you would earn a total of  163.00  from holding Americafirst Large Cap or generate 12.13% return on investment over 90 days.

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

Americafirst Large Cap  vs.  Franklin Real Estate

Americafirst Large Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Americafirst Large Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Americafirst Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Franklin Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Americafirst Large and Franklin Real

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

The idea behind Americafirst Large Cap and Franklin Real Estate 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.