Correlation Between Inverse High and Franklin Emerging
Can any of the company-specific risk be diversified away by investing in both Inverse High and Franklin Emerging 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 Inverse High and Franklin Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse High Yield and Franklin Emerging Market, you can compare the effects of market volatilities on Inverse High and Franklin Emerging 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 Inverse High with a short position of Franklin Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse High and Franklin Emerging.
Diversification Opportunities for Inverse High and Franklin Emerging
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Inverse and Franklin is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Inverse High Yield and Franklin Emerging Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Emerging Market and Inverse High 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 Inverse High Yield are associated (or correlated) with Franklin Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Emerging Market has no effect on the direction of Inverse High i.e., Inverse High and Franklin Emerging go up and down completely randomly.
Pair Corralation between Inverse High and Franklin Emerging
Assuming the 90 days horizon Inverse High is expected to generate 7.92 times less return on investment than Franklin Emerging. But when comparing it to its historical volatility, Inverse High Yield is 1.05 times less risky than Franklin Emerging. It trades about 0.01 of its potential returns per unit of risk. Franklin Emerging Market is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,077 in Franklin Emerging Market on September 24, 2024 and sell it today you would earn a total of 77.00 from holding Franklin Emerging Market or generate 7.15% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Inverse High Yield vs. Franklin Emerging Market
Performance |
Timeline |
Inverse High Yield |
Franklin Emerging Market |
Inverse High and Franklin Emerging Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Inverse High and Franklin Emerging
The main advantage of trading using opposite Inverse High and Franklin Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse High position performs unexpectedly, Franklin Emerging 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 Emerging will offset losses from the drop in Franklin Emerging's long position.Inverse High vs. Basic Materials Fund | Inverse High vs. Basic Materials Fund | Inverse High vs. Banking Fund Class | Inverse High vs. Basic Materials Fund |
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Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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