Correlation Between Franklin Gold and Pioneer Equity

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

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

Diversification Opportunities for Franklin Gold and Pioneer Equity

0.5

Correlation Coefficient

Franklin Gold  Pioneer Equity

Very weak diversification

The 3 months correlation between Franklin and Pioneer is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Gold Precious and Pioneer Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Equity Income and Franklin Gold 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 Gold Precious are associated (or correlated) with Pioneer Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Equity Income has no effect on the direction of Franklin Gold i.e., Franklin Gold and Pioneer Equity go up and down completely randomly.

Pair Corralation between Franklin Gold and Pioneer Equity

Assuming the 90 days horizon Franklin Gold Precious is expected to under-perform the Pioneer Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin Gold Precious is 1.51 times less risky than Pioneer Equity. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Pioneer Equity Income is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  3,300  in Pioneer Equity Income on September 24, 2024 and sell it today you would lose (874.00) from holding Pioneer Equity Income or give up 26.48% of portfolio value over 90 days.

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

Franklin Gold Precious  vs.  Pioneer Equity Income

Franklin Gold Precious

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Gold Precious has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pioneer Equity Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pioneer Equity Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward-looking signals remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Franklin Gold and Pioneer Equity

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

The idea behind Franklin Gold Precious and Pioneer Equity 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..