Correlation Between Franklin Gold and Transam Short

Can any of the company-specific risk be diversified away by investing in both Franklin Gold and Transam Short 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 Transam Short 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 Transam Short Term Bond, you can compare the effects of market volatilities on Franklin Gold and Transam Short 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 Transam Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Gold and Transam Short.

Diversification Opportunities for Franklin Gold and Transam Short

0.08

Correlation Coefficient

Franklin Gold  Transam Short

Significant diversification

The 3 months correlation between Franklin and Transam is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Gold Precious and Transam Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transam Short Term 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 Transam Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transam Short Term has no effect on the direction of Franklin Gold i.e., Franklin Gold and Transam Short go up and down completely randomly.

Pair Corralation between Franklin Gold and Transam Short

Assuming the 90 days horizon Franklin Gold Precious is expected to under-perform the Transam Short. In addition to that, Franklin Gold is 18.5 times more volatile than Transam Short Term Bond. It trades about -0.17 of its total potential returns per unit of risk. Transam Short Term Bond is currently generating about -0.09 per unit of volatility. If you would invest  986.00  in Transam Short Term Bond on September 30, 2024 and sell it today you would lose (7.00) from holding Transam Short Term Bond or give up 0.71% of portfolio value over 90 days.

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

Franklin Gold Precious  vs.  Transam Short Term Bond

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.

Transam Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transam Short Term Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Transam Short 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 Gold and Transam Short

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

The idea behind Franklin Gold Precious and Transam Short Term Bond 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.