Correlation Between Franklin Resources and Travelers Companies

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

By analyzing existing cross correlation between Franklin Resources and The Travelers Companies, you can compare the effects of market volatilities on Franklin Resources and Travelers Companies 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 Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Resources and Travelers Companies.

Diversification Opportunities for Franklin Resources and Travelers Companies

0.74

Correlation Coefficient

Franklin Resources  Travelers Companies

Poor diversification

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

Pair Corralation between Franklin Resources and Travelers Companies

Considering the 90-day investment horizon Franklin Resources is expected to under-perform the Travelers Companies. In addition to that, Franklin Resources is 1.29 times more volatile than The Travelers Companies. It trades about -0.01 of its total potential returns per unit of risk. The Travelers Companies is currently generating about 0.05 per unit of volatility. If you would invest  17,966  in The Travelers Companies on September 24, 2024 and sell it today you would earn a total of  6,110  from holding The Travelers Companies or generate 34.01% return on investment over 90 days.

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

Franklin Resources  vs.  The Travelers Companies

Franklin Resources

Risk-Adjusted Performance

0 of 100

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.

The Travelers Companies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Travelers Companies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Travelers Companies is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Franklin Resources and Travelers Companies

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

The idea behind Franklin Resources and The Travelers Companies 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.