Correlation Between Franklin Growth and Short Duration

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

By analyzing existing cross correlation between Franklin Growth Opportunities and Short Duration Inflation, you can compare the effects of market volatilities on Franklin Growth and Short Duration 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 Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Growth and Short Duration.

Diversification Opportunities for Franklin Growth and Short Duration

-0.09

Correlation Coefficient

Franklin Growth  Short Duration

Good diversification

The 3 months correlation between Franklin and Short is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Growth Opportunities and Short Duration Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Inflation 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 Opportunities are associated (or correlated) with Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Inflation has no effect on the direction of Franklin Growth i.e., Franklin Growth and Short Duration go up and down completely randomly.

Pair Corralation between Franklin Growth and Short Duration

Assuming the 90 days horizon Franklin Growth Opportunities is expected to generate 5.87 times more return on investment than Short Duration. However, Franklin Growth is 5.87 times more volatile than Short Duration Inflation. It trades about 0.09 of its potential returns per unit of risk. Short Duration Inflation is currently generating about 0.09 per unit of risk. If you would invest  3,873  in Franklin Growth Opportunities on September 14, 2024 and sell it today you would earn a total of  2,559  from holding Franklin Growth Opportunities or generate 66.07% return on investment over 90 days.

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

Franklin Growth Opportunities  vs.  Short Duration Inflation

Franklin Growth Oppo

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Growth Opportunities are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Franklin Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Short Duration Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Franklin Growth and Short Duration

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

The idea behind Franklin Growth Opportunities and Short Duration Inflation 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.