Correlation Between Real Estate and Franklin Real

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

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

Diversification Opportunities for Real Estate and Franklin Real

0.99

Correlation Coefficient

Real Estate  Franklin Real

No risk reduction

The 3 months correlation between Real and Franklin is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Ultrasector and Franklin Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Real Estate and Real Estate 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 Real Estate Ultrasector are associated (or correlated) with Franklin Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Real Estate has no effect on the direction of Real Estate i.e., Real Estate and Franklin Real go up and down completely randomly.

Pair Corralation between Real Estate and Franklin Real

Assuming the 90 days horizon Real Estate Ultrasector is expected to under-perform the Franklin Real. In addition to that, Real Estate is 1.55 times more volatile than Franklin Real Estate. It trades about -0.01 of its total potential returns per unit of risk. Franklin Real Estate is currently generating about 0.0 per unit of volatility. If you would invest  1,626  in Franklin Real Estate on January 15, 2025 and sell it today you would lose (9.00) from holding Franklin Real Estate or give up 0.55% of portfolio value over 90 days.

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

Real Estate Ultrasector  vs.  Franklin Real Estate

Real Estate Ultrasector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Real Estate Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Real Estate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Franklin Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Real Estate and Franklin Real

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

The idea behind Real Estate Ultrasector and Franklin Real Estate 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.