Correlation Between Franklin Utilities and Utilities Portfolio

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

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

Diversification Opportunities for Franklin Utilities and Utilities Portfolio

0.98

Correlation Coefficient

Franklin Utilities  Utilities Portfolio

Almost no diversification

The 3 months correlation between Franklin and Utilities is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Utilities Fund and Utilities Portfolio Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Portfolio and Franklin Utilities 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 Utilities Fund are associated (or correlated) with Utilities Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Portfolio has no effect on the direction of Franklin Utilities i.e., Franklin Utilities and Utilities Portfolio go up and down completely randomly.

Pair Corralation between Franklin Utilities and Utilities Portfolio

Assuming the 90 days horizon Franklin Utilities is expected to generate 1.37 times less return on investment than Utilities Portfolio. But when comparing it to its historical volatility, Franklin Utilities Fund is 1.18 times less risky than Utilities Portfolio. It trades about 0.13 of its potential returns per unit of risk. Utilities Portfolio Utilities is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  11,797  in Utilities Portfolio Utilities on September 4, 2024 and sell it today you would earn a total of  1,296  from holding Utilities Portfolio Utilities or generate 10.99% return on investment over 90 days.

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

Franklin Utilities Fund  vs.  Utilities Portfolio Utilities

Franklin Utilities

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Utilities Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unsteady basic indicators, Franklin Utilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Utilities Portfolio

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Portfolio Utilities are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Utilities Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Franklin Utilities and Utilities Portfolio

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

The idea behind Franklin Utilities Fund and Utilities Portfolio Utilities 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..