Correlation Between State Street and Franklin Resources

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

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

Diversification Opportunities for State Street and Franklin Resources

0.0

Correlation Coefficient

State Street  Franklin Resources

Pay attention - limited upside

The 3 months correlation between State and Franklin is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding State Street and Franklin Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Resources and State Street 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 State Street are associated (or correlated) with Franklin Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Resources has no effect on the direction of State Street i.e., State Street and Franklin Resources go up and down completely randomly.

Pair Corralation between State Street and Franklin Resources

Assuming the 90 days trading horizon State Street is expected to generate 0.29 times more return on investment than Franklin Resources. However, State Street is 3.46 times less risky than Franklin Resources. It trades about 0.07 of its potential returns per unit of risk. Franklin Resources is currently generating about -0.02 per unit of risk. If you would invest  2,187  in State Street on October 5, 2024 and sell it today you would earn a total of  213.00  from holding State Street or generate 9.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

State Street  vs.  Franklin Resources

State Street

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Street has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Franklin Resources

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Franklin Resources is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with State Street and Franklin Resources

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

The idea behind State Street and Franklin Resources 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..