Correlation Between Western Midstream and Franchise

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

By analyzing existing cross correlation between Western Midstream Partners and Franchise Group, you can compare the effects of market volatilities on Western Midstream and Franchise 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 Western Midstream with a short position of Franchise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Midstream and Franchise.

Diversification Opportunities for Western Midstream and Franchise

0.16

Correlation Coefficient

Western Midstream  Franchise

Average diversification

The 3 months correlation between Western and Franchise is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Western Midstream Partners and Franchise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franchise Group and Western Midstream 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 Western Midstream Partners are associated (or correlated) with Franchise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franchise Group has no effect on the direction of Western Midstream i.e., Western Midstream and Franchise go up and down completely randomly.

Pair Corralation between Western Midstream and Franchise

If you would invest  3,807  in Western Midstream Partners on September 25, 2024 and sell it today you would earn a total of  100.00  from holding Western Midstream Partners or generate 2.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Western Midstream Partners  vs.  Franchise Group

Western Midstream

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Midstream Partners are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Western Midstream is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Franchise Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franchise Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Franchise is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Western Midstream and Franchise

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

The idea behind Western Midstream Partners and Franchise Group 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.