Correlation Between Ivy Energy and Franklin Natural

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

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

Diversification Opportunities for Ivy Energy and Franklin Natural

0.22

Correlation Coefficient

Ivy Energy  Franklin Natural

Modest diversification

The 3 months correlation between Ivy and Franklin is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ivy Energy Fund and Franklin Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Natural Res and Ivy Energy 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 Ivy Energy Fund are associated (or correlated) with Franklin Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Natural Res has no effect on the direction of Ivy Energy i.e., Ivy Energy and Franklin Natural go up and down completely randomly.

Pair Corralation between Ivy Energy and Franklin Natural

Assuming the 90 days horizon Ivy Energy is expected to generate 2.58 times less return on investment than Franklin Natural. But when comparing it to its historical volatility, Ivy Energy Fund is 1.03 times less risky than Franklin Natural. It trades about 0.04 of its potential returns per unit of risk. Franklin Natural Resources is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,000  in Franklin Natural Resources on September 3, 2024 and sell it today you would earn a total of  177.00  from holding Franklin Natural Resources or generate 5.9% return on investment over 90 days.

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

Ivy Energy Fund  vs.  Franklin Natural Resources

Ivy Energy Fund

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ivy Energy Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ivy Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Natural Res

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Natural Resources are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ivy Energy and Franklin Natural

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

The idea behind Ivy Energy Fund and Franklin Natural Resources 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.