Correlation Between Main Sector and Franklin Exponential

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

By analyzing existing cross correlation between Main Sector Rotation and Franklin Exponential Data, you can compare the effects of market volatilities on Main Sector and Franklin Exponential 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 Main Sector with a short position of Franklin Exponential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Sector and Franklin Exponential.

Diversification Opportunities for Main Sector and Franklin Exponential

0.96

Correlation Coefficient

Main Sector  Franklin Exponential

Almost no diversification

The 3 months correlation between Main and Franklin is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Main Sector Rotation and Franklin Exponential Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Exponential Data and Main Sector 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 Main Sector Rotation are associated (or correlated) with Franklin Exponential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Exponential Data has no effect on the direction of Main Sector i.e., Main Sector and Franklin Exponential go up and down completely randomly.

Pair Corralation between Main Sector and Franklin Exponential

Given the investment horizon of 90 days Main Sector Rotation is expected to generate 0.84 times more return on investment than Franklin Exponential. However, Main Sector Rotation is 1.19 times less risky than Franklin Exponential. It trades about -0.14 of its potential returns per unit of risk. Franklin Exponential Data is currently generating about -0.27 per unit of risk. If you would invest  5,762  in Main Sector Rotation on October 7, 2024 and sell it today you would lose (187.00) from holding Main Sector Rotation or give up 3.25% of portfolio value over 90 days.

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

Main Sector Rotation  vs.  Franklin Exponential Data

Main Sector Rotation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Main Sector Rotation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Main Sector is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Franklin Exponential Data

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Exponential Data are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Franklin Exponential may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Main Sector and Franklin Exponential

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

The idea behind Main Sector Rotation and Franklin Exponential Data 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.