Correlation Between Franklin FTSE and ZEGA Buy

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

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

Diversification Opportunities for Franklin FTSE and ZEGA Buy

0.49

Correlation Coefficient

Franklin FTSE  ZEGA Buy

Very weak diversification

The 3 months correlation between Franklin and ZEGA is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Franklin FTSE Mexico and ZEGA Buy and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZEGA Buy and Franklin FTSE 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 FTSE Mexico are associated (or correlated) with ZEGA Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZEGA Buy has no effect on the direction of Franklin FTSE i.e., Franklin FTSE and ZEGA Buy go up and down completely randomly.

Pair Corralation between Franklin FTSE and ZEGA Buy

Given the investment horizon of 90 days Franklin FTSE Mexico is expected to under-perform the ZEGA Buy. In addition to that, Franklin FTSE is 1.71 times more volatile than ZEGA Buy and. It trades about -0.17 of its total potential returns per unit of risk. ZEGA Buy and is currently generating about -0.2 per unit of volatility. If you would invest  1,872  in ZEGA Buy and on January 26, 2024 and sell it today you would lose (48.00) from holding ZEGA Buy and or give up 2.56% of portfolio value over 90 days.

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

Franklin FTSE Mexico  vs.  ZEGA Buy and

Franklin FTSE Mexico

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin FTSE Mexico has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Franklin FTSE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

ZEGA Buy

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZEGA Buy and are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, ZEGA Buy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Franklin FTSE and ZEGA Buy

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

The idea behind Franklin FTSE Mexico and ZEGA Buy and 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.