Correlation Between Income Stock and Franklin Adjustable

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

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

Diversification Opportunities for Income Stock and Franklin Adjustable

-0.43

Correlation Coefficient

Income Stock  Franklin Adjustable

Very good diversification

The 3 months correlation between Income and Franklin is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Income Stock Fund and Franklin Adjustable Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Adjustable and Income Stock 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 Income Stock Fund are associated (or correlated) with Franklin Adjustable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Adjustable has no effect on the direction of Income Stock i.e., Income Stock and Franklin Adjustable go up and down completely randomly.

Pair Corralation between Income Stock and Franklin Adjustable

Assuming the 90 days horizon Income Stock Fund is expected to under-perform the Franklin Adjustable. In addition to that, Income Stock is 19.84 times more volatile than Franklin Adjustable Government. It trades about -0.14 of its total potential returns per unit of risk. Franklin Adjustable Government is currently generating about 0.07 per unit of volatility. If you would invest  750.00  in Franklin Adjustable Government on October 12, 2024 and sell it today you would earn a total of  3.00  from holding Franklin Adjustable Government or generate 0.4% return on investment over 90 days.

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

Income Stock Fund  vs.  Franklin Adjustable Government

Income Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Income Stock Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Franklin Adjustable

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Adjustable Government are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Franklin Adjustable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Income Stock and Franklin Adjustable

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

The idea behind Income Stock Fund and Franklin Adjustable Government 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.