Correlation Between Fundamental Large and Franklin Biotechnology

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

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

Diversification Opportunities for Fundamental Large and Franklin Biotechnology

0.76

Correlation Coefficient

Fundamental Large  Franklin Biotechnology

Poor diversification

The 3 months correlation between Fundamental and Franklin is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and Franklin Biotechnology Discove in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Biotechnology and Fundamental 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 Fundamental Large Cap are associated (or correlated) with Franklin Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Biotechnology has no effect on the direction of Fundamental Large i.e., Fundamental Large and Franklin Biotechnology go up and down completely randomly.

Pair Corralation between Fundamental Large and Franklin Biotechnology

Assuming the 90 days horizon Fundamental Large Cap is expected to under-perform the Franklin Biotechnology. But the mutual fund apears to be less risky and, when comparing its historical volatility, Fundamental Large Cap is 1.21 times less risky than Franklin Biotechnology. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Franklin Biotechnology Discovery is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  12,825  in Franklin Biotechnology Discovery on December 23, 2024 and sell it today you would earn a total of  195.00  from holding Franklin Biotechnology Discovery or generate 1.52% return on investment over 90 days.

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

Fundamental Large Cap  vs.  Franklin Biotechnology Discove

Fundamental Large Cap

Risk-Adjusted Performance

Very Weak

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

Franklin Biotechnology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Biotechnology Discovery are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Biotechnology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fundamental Large and Franklin Biotechnology

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

The idea behind Fundamental Large Cap and Franklin Biotechnology Discovery 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.