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 Corp 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

0.52

Correlation Coefficient

State Street  Franklin Resources

Very weak diversification

The 3 months correlation between State and Franklin is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding State Street Corp 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 Corp 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

Considering the 90-day investment horizon State Street Corp is expected to under-perform the Franklin Resources. But the stock apears to be less risky and, when comparing its historical volatility, State Street Corp is 1.25 times less risky than Franklin Resources. The stock trades about -0.05 of its potential returns per unit of risk. The Franklin Resources is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,011  in Franklin Resources on December 28, 2024 and sell it today you would lose (26.00) from holding Franklin Resources or give up 1.29% of portfolio value over 90 days.

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

State Street Corp  vs.  Franklin Resources

State Street Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Street Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, State Street is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Franklin Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Resources has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Corp 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..