Correlation Between Franklin Mutual and Energy Basic
Can any of the company-specific risk be diversified away by investing in both Franklin Mutual and Energy Basic 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 Franklin Mutual and Energy Basic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Mutual Global and Energy Basic Materials, you can compare the effects of market volatilities on Franklin Mutual and Energy Basic 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 Franklin Mutual with a short position of Energy Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Energy Basic.
Diversification Opportunities for Franklin Mutual and Energy Basic
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Energy is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and Energy Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Basic Materials and Franklin Mutual 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 Franklin Mutual Global are associated (or correlated) with Energy Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Basic Materials has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Energy Basic go up and down completely randomly.
Pair Corralation between Franklin Mutual and Energy Basic
Assuming the 90 days horizon Franklin Mutual Global is expected to under-perform the Energy Basic. In addition to that, Franklin Mutual is 2.09 times more volatile than Energy Basic Materials. It trades about -0.32 of its total potential returns per unit of risk. Energy Basic Materials is currently generating about -0.53 per unit of volatility. If you would invest 1,281 in Energy Basic Materials on September 25, 2024 and sell it today you would lose (130.00) from holding Energy Basic Materials or give up 10.15% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Franklin Mutual Global vs. Energy Basic Materials
Performance |
Timeline |
Franklin Mutual Global |
Energy Basic Materials |
Franklin Mutual and Energy Basic Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Franklin Mutual and Energy Basic
The main advantage of trading using opposite Franklin Mutual and Energy Basic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Mutual position performs unexpectedly, Energy Basic 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 Energy Basic will offset losses from the drop in Energy Basic's long position.Franklin Mutual vs. Transamerica Cleartrack Retirement | Franklin Mutual vs. Columbia Moderate Growth | Franklin Mutual vs. College Retirement Equities | Franklin Mutual vs. Fidelity Managed Retirement |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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