Correlation Between Franklin Income and PAR Technology

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

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

Diversification Opportunities for Franklin Income and PAR Technology

-0.51

Correlation Coefficient

Franklin Income  PAR Technology

Excellent diversification

The 3 months correlation between Franklin and PAR is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Income and PAR Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAR Technology and Franklin Income 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 Income are associated (or correlated) with PAR Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAR Technology has no effect on the direction of Franklin Income i.e., Franklin Income and PAR Technology go up and down completely randomly.

Pair Corralation between Franklin Income and PAR Technology

Assuming the 90 days horizon Franklin Income is expected to under-perform the PAR Technology. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin Income is 4.94 times less risky than PAR Technology. The mutual fund trades about -0.09 of its potential returns per unit of risk. The PAR Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,260  in PAR Technology on January 25, 2024 and sell it today you would lose (2.00) from holding PAR Technology or give up 0.05% of portfolio value over 90 days.

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

Franklin Income  vs.  PAR Technology

Franklin Income

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Income are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PAR Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PAR Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Franklin Income and PAR Technology

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

The idea behind Franklin Income and PAR Technology 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.