Correlation Between Baron Real and Franklin High

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

By analyzing existing cross correlation between Baron Real Estate and Franklin High Income, you can compare the effects of market volatilities on Baron Real and Franklin High 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 Baron Real with a short position of Franklin High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Real and Franklin High.

Diversification Opportunities for Baron Real and Franklin High

0.38

Correlation Coefficient

Baron Real  Franklin High

Weak diversification

The 3 months correlation between Baron and Franklin is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Baron Real Estate and Franklin High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin High Income and Baron Real 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 Baron Real Estate are associated (or correlated) with Franklin High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin High Income has no effect on the direction of Baron Real i.e., Baron Real and Franklin High go up and down completely randomly.

Pair Corralation between Baron Real and Franklin High

Assuming the 90 days horizon Baron Real Estate is expected to generate 3.93 times more return on investment than Franklin High. However, Baron Real is 3.93 times more volatile than Franklin High Income. It trades about 0.15 of its potential returns per unit of risk. Franklin High Income is currently generating about 0.12 per unit of risk. If you would invest  1,423  in Baron Real Estate on September 29, 2024 and sell it today you would earn a total of  259.00  from holding Baron Real Estate or generate 18.2% return on investment over 90 days.

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

Baron Real Estate  vs.  Franklin High Income

Baron Real Estate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Real Estate are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Baron Real is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Franklin High Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Baron Real and Franklin High

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

The idea behind Baron Real Estate and Franklin High Income 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.