Correlation Between Franklin International and Russell Equity

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

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

Diversification Opportunities for Franklin International and Russell Equity

-0.22

Correlation Coefficient

Franklin International  Russell Equity

Very good diversification

The 3 months correlation between Franklin and Russell is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Franklin International Core and Russell Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell Equity Income and Franklin International 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 International Core are associated (or correlated) with Russell Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell Equity Income has no effect on the direction of Franklin International i.e., Franklin International and Russell Equity go up and down completely randomly.

Pair Corralation between Franklin International and Russell Equity

Given the investment horizon of 90 days Franklin International Core is expected to under-perform the Russell Equity. In addition to that, Franklin International is 1.36 times more volatile than Russell Equity Income. It trades about -0.08 of its total potential returns per unit of risk. Russell Equity Income is currently generating about 0.12 per unit of volatility. If you would invest  4,593  in Russell Equity Income on September 4, 2024 and sell it today you would earn a total of  206.00  from holding Russell Equity Income or generate 4.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Franklin International Core  vs.  Russell Equity Income

Franklin International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin International Core has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Franklin International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Russell Equity Income

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Russell Equity Income are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Russell Equity is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Franklin International and Russell Equity

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

The idea behind Franklin International Core and Russell Equity Income 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.