Correlation Between Wasatch Us and Franklin Convertible

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

By analyzing existing cross correlation between Wasatch Select Investor and Franklin Vertible Securities, you can compare the effects of market volatilities on Wasatch Us and Franklin Convertible 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 Wasatch Us with a short position of Franklin Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wasatch Us and Franklin Convertible.

Diversification Opportunities for Wasatch Us and Franklin Convertible

0.6

Correlation Coefficient

Wasatch Us  Franklin Convertible

Poor diversification

The 3 months correlation between Wasatch and Franklin is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Select Investor and Franklin Vertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Convertible and Wasatch Us 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 Wasatch Select Investor are associated (or correlated) with Franklin Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Convertible has no effect on the direction of Wasatch Us i.e., Wasatch Us and Franklin Convertible go up and down completely randomly.

Pair Corralation between Wasatch Us and Franklin Convertible

Assuming the 90 days horizon Wasatch Select Investor is expected to under-perform the Franklin Convertible. In addition to that, Wasatch Us is 1.65 times more volatile than Franklin Vertible Securities. It trades about -0.09 of its total potential returns per unit of risk. Franklin Vertible Securities is currently generating about -0.04 per unit of volatility. If you would invest  2,346  in Franklin Vertible Securities on December 22, 2024 and sell it today you would lose (45.00) from holding Franklin Vertible Securities or give up 1.92% of portfolio value over 90 days.

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

Wasatch Select Investor  vs.  Franklin Vertible Securities

Wasatch Select Investor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wasatch Select Investor has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Franklin Convertible

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Vertible Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Franklin Convertible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wasatch Us and Franklin Convertible

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

The idea behind Wasatch Select Investor and Franklin Vertible Securities 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.