Correlation Between Franklin Growth and Franklin Balance

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

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

Diversification Opportunities for Franklin Growth and Franklin Balance

0.76

Correlation Coefficient

Franklin Growth  Franklin Balance

Poor diversification

The 3 months correlation between Franklin and Franklin is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Growth Fund and Franklin Balance Sheet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Balance Sheet and Franklin Growth 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 Growth Fund are associated (or correlated) with Franklin Balance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Balance Sheet has no effect on the direction of Franklin Growth i.e., Franklin Growth and Franklin Balance go up and down completely randomly.

Pair Corralation between Franklin Growth and Franklin Balance

Assuming the 90 days horizon Franklin Growth Fund is expected to generate 1.1 times more return on investment than Franklin Balance. However, Franklin Growth is 1.1 times more volatile than Franklin Balance Sheet. It trades about -0.08 of its potential returns per unit of risk. Franklin Balance Sheet is currently generating about -0.12 per unit of risk. If you would invest  14,574  in Franklin Growth Fund on September 28, 2024 and sell it today you would lose (849.00) from holding Franklin Growth Fund or give up 5.83% of portfolio value over 90 days.

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

Franklin Growth Fund  vs.  Franklin Balance Sheet

Franklin Growth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Franklin Balance Sheet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Balance Sheet has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Franklin Growth and Franklin Balance

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

The idea behind Franklin Growth Fund and Franklin Balance Sheet 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.