Correlation Between Franklin Dynatech and Franklin Rising

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

By analyzing existing cross correlation between Franklin Dynatech Fund and Franklin Rising Dividends, you can compare the effects of market volatilities on Franklin Dynatech and Franklin Rising 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 Dynatech with a short position of Franklin Rising. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Dynatech and Franklin Rising.

Diversification Opportunities for Franklin Dynatech and Franklin Rising

0.89

Correlation Coefficient

Franklin Dynatech  Franklin Rising

Very poor diversification

The 3 months correlation between Franklin and Franklin is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Dynatech Fund and Franklin Rising Dividends in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Rising Dividends and Franklin Dynatech 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 Dynatech Fund are associated (or correlated) with Franklin Rising. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Rising Dividends has no effect on the direction of Franklin Dynatech i.e., Franklin Dynatech and Franklin Rising go up and down completely randomly.

Pair Corralation between Franklin Dynatech and Franklin Rising

Assuming the 90 days horizon Franklin Dynatech Fund is expected to generate 1.95 times more return on investment than Franklin Rising. However, Franklin Dynatech is 1.95 times more volatile than Franklin Rising Dividends. It trades about 0.1 of its potential returns per unit of risk. Franklin Rising Dividends is currently generating about 0.09 per unit of risk. If you would invest  12,762  in Franklin Dynatech Fund on September 2, 2024 and sell it today you would earn a total of  4,861  from holding Franklin Dynatech Fund or generate 38.09% return on investment over 90 days.

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

Franklin Dynatech Fund  vs.  Franklin Rising Dividends

Franklin Dynatech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Dynatech Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Franklin Dynatech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Franklin Rising Dividends

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Rising Dividends are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Rising is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Dynatech and Franklin Rising

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

The idea behind Franklin Dynatech Fund and Franklin Rising Dividends 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.