Correlation Between Great Western and Franklin Floating

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

By analyzing existing cross correlation between Great Western Mining and Franklin Floating Rate, you can compare the effects of market volatilities on Great Western and Franklin Floating 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 Great Western with a short position of Franklin Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Western and Franklin Floating.

Diversification Opportunities for Great Western and Franklin Floating

0.68

Correlation Coefficient

Great Western  Franklin Floating

Poor diversification

The 3 months correlation between Great and Franklin is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Great Western Mining and Franklin Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Floating Rate and Great Western 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 Great Western Mining are associated (or correlated) with Franklin Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Floating Rate has no effect on the direction of Great Western i.e., Great Western and Franklin Floating go up and down completely randomly.

Pair Corralation between Great Western and Franklin Floating

Assuming the 90 days trading horizon Great Western Mining is expected to generate 164.41 times more return on investment than Franklin Floating. However, Great Western is 164.41 times more volatile than Franklin Floating Rate. It trades about 0.12 of its potential returns per unit of risk. Franklin Floating Rate is currently generating about 0.41 per unit of risk. If you would invest  0.05  in Great Western Mining on September 18, 2024 and sell it today you would earn a total of  0.05  from holding Great Western Mining or generate 100.0% return on investment over 90 days.

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

Great Western Mining  vs.  Franklin Floating Rate

Great Western Mining

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Western Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Great Western reported solid returns over the last few months and may actually be approaching a breakup point.

Franklin Floating Rate

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Floating Rate are ranked lower than 32 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong fundamental indicators, Franklin Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Great Western and Franklin Floating

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

The idea behind Great Western Mining and Franklin Floating Rate 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.