Correlation Between Franklin High and Columbia Integrated

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

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

Diversification Opportunities for Franklin High and Columbia Integrated

0.1

Correlation Coefficient

Franklin High  Columbia Integrated

Average diversification

The 3 months correlation between Franklin and Columbia is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Income and Columbia Integrated Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Integrated Small and Franklin High 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 High Income are associated (or correlated) with Columbia Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Integrated Small has no effect on the direction of Franklin High i.e., Franklin High and Columbia Integrated go up and down completely randomly.

Pair Corralation between Franklin High and Columbia Integrated

Assuming the 90 days horizon Franklin High Income is expected to under-perform the Columbia Integrated. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin High Income is 3.35 times less risky than Columbia Integrated. The mutual fund trades about -0.22 of its potential returns per unit of risk. The Columbia Integrated Small is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest  1,739  in Columbia Integrated Small on September 22, 2024 and sell it today you would earn a total of  29.00  from holding Columbia Integrated Small or generate 1.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	19.05%
Values	Daily Returns

Franklin High Income  vs.  Columbia Integrated Small

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.

Columbia Integrated Small

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Columbia Integrated Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak essential indicators, Columbia Integrated showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin High and Columbia Integrated

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

The idea behind Franklin High Income and Columbia Integrated Small 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.