Correlation Between Franklin Income and Pender Real

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

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

Diversification Opportunities for Franklin Income and Pender Real

-0.59

Correlation Coefficient

Franklin Income  Pender Real

Excellent diversification

The 3 months correlation between Franklin and Pender is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Income Fund and Pender Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pender Real Estate and Franklin Income 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 Income Fund are associated (or correlated) with Pender Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pender Real Estate has no effect on the direction of Franklin Income i.e., Franklin Income and Pender Real go up and down completely randomly.

Pair Corralation between Franklin Income and Pender Real

Assuming the 90 days horizon Franklin Income is expected to generate 1.24 times less return on investment than Pender Real. In addition to that, Franklin Income is 6.77 times more volatile than Pender Real Estate. It trades about 0.06 of its total potential returns per unit of risk. Pender Real Estate is currently generating about 0.53 per unit of volatility. If you would invest  885.00  in Pender Real Estate on September 29, 2024 and sell it today you would earn a total of  125.00  from holding Pender Real Estate or generate 14.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	84.71%
Values	Daily Returns

Franklin Income Fund  vs.  Pender Real Estate

Franklin Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pender Real Estate

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pender Real Estate are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pender Real 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 Income and Pender Real

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

The idea behind Franklin Income Fund and Pender Real Estate 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.