Correlation Between Franklin Resources and Palomar Holdings

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Can any of the company-specific risk be diversified away by investing in both Franklin Resources and Palomar Holdings 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 Resources and Palomar Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Resources and Palomar Holdings, you can compare the effects of market volatilities on Franklin Resources and Palomar Holdings 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 Resources with a short position of Palomar Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Resources and Palomar Holdings.

Diversification Opportunities for Franklin Resources and Palomar Holdings

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Franklin and Palomar is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Resources and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings and Franklin Resources 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 Resources are associated (or correlated) with Palomar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palomar Holdings has no effect on the direction of Franklin Resources i.e., Franklin Resources and Palomar Holdings go up and down completely randomly.

Pair Corralation between Franklin Resources and Palomar Holdings

Considering the 90-day investment horizon Franklin Resources is expected to under-perform the Palomar Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Franklin Resources is 1.39 times less risky than Palomar Holdings. The stock trades about 0.0 of its potential returns per unit of risk. The Palomar Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,619  in Palomar Holdings on September 24, 2024 and sell it today you would earn a total of  874.00  from holding Palomar Holdings or generate 9.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Franklin Resources  vs.  Palomar Holdings

 Performance 
       Timeline  
Franklin Resources 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Franklin Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Franklin Resources is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Palomar Holdings 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Palomar Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Palomar Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Franklin Resources and Palomar Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Franklin Resources and Palomar Holdings

The main advantage of trading using opposite Franklin Resources and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Resources position performs unexpectedly, Palomar Holdings 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 Palomar Holdings will offset losses from the drop in Palomar Holdings' long position.
The idea behind Franklin Resources and Palomar Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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