Correlation Between Franklin Street and TARGA

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

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

Diversification Opportunities for Franklin Street and TARGA

-0.43

Correlation Coefficient

Franklin Street  TARGA

Very good diversification

The 3 months correlation between Franklin and TARGA is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Street Properties and TARGA RES PARTNERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TARGA RES PARTNERS and Franklin Street 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 Street Properties are associated (or correlated) with TARGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TARGA RES PARTNERS has no effect on the direction of Franklin Street i.e., Franklin Street and TARGA go up and down completely randomly.

Pair Corralation between Franklin Street and TARGA

Considering the 90-day investment horizon Franklin Street Properties is expected to generate 19.65 times more return on investment than TARGA. However, Franklin Street is 19.65 times more volatile than TARGA RES PARTNERS. It trades about 0.06 of its potential returns per unit of risk. TARGA RES PARTNERS is currently generating about -0.1 per unit of risk. If you would invest  176.00  in Franklin Street Properties on September 3, 2024 and sell it today you would earn a total of  15.00  from holding Franklin Street Properties or generate 8.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Franklin Street Properties  vs.  TARGA RES PARTNERS

Franklin Street Prop

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Street Properties are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Franklin Street may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TARGA RES PARTNERS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TARGA RES PARTNERS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TARGA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Street and TARGA

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

The idea behind Franklin Street Properties and TARGA RES PARTNERS 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.