Correlation Between Franklin Resources and American Express

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

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

Diversification Opportunities for Franklin Resources and American Express

-0.06

Correlation Coefficient

Franklin Resources  American Express

Good diversification

The 3 months correlation between Franklin and American is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Resources and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Franklin Resources 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 Resources are associated (or correlated) with American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Franklin Resources i.e., Franklin Resources and American Express go up and down completely randomly.

Pair Corralation between Franklin Resources and American Express

Considering the 90-day investment horizon Franklin Resources is expected to generate 77.61 times less return on investment than American Express. In addition to that, Franklin Resources is 1.26 times more volatile than American Express. It trades about 0.0 of its total potential returns per unit of risk. American Express is currently generating about 0.1 per unit of volatility. If you would invest  15,838  in American Express on January 17, 2024 and sell it today you would earn a total of  6,002  from holding American Express or generate 37.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Franklin Resources  vs.  American Express

Franklin Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

American Express

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin Resources and American Express

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

The idea behind Franklin Resources and American Express 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.