Correlation Between Franklin Growth and Transamerica Mid

Can any of the company-specific risk be diversified away by investing in both Franklin Growth and Transamerica Mid 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 Transamerica Mid 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 Transamerica Mid Cap, you can compare the effects of market volatilities on Franklin Growth and Transamerica Mid 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 Transamerica Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Growth and Transamerica Mid.

Diversification Opportunities for Franklin Growth and Transamerica Mid

0.86

Correlation Coefficient

Franklin Growth  Transamerica Mid

Very poor diversification

The 3 months correlation between Franklin and Transamerica is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Growth Opportunities and Transamerica Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Mid Cap 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 Transamerica Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Mid Cap has no effect on the direction of Franklin Growth i.e., Franklin Growth and Transamerica Mid go up and down completely randomly.

Pair Corralation between Franklin Growth and Transamerica Mid

Assuming the 90 days horizon Franklin Growth Opportunities is expected to under-perform the Transamerica Mid. In addition to that, Franklin Growth is 1.25 times more volatile than Transamerica Mid Cap. It trades about -0.05 of its total potential returns per unit of risk. Transamerica Mid Cap is currently generating about 0.1 per unit of volatility. If you would invest  997.00  in Transamerica Mid Cap on September 22, 2024 and sell it today you would earn a total of  68.00  from holding Transamerica Mid Cap or generate 6.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Franklin Growth Opportunities  vs.  Transamerica Mid Cap

Franklin Growth Oppo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Growth Opportunities 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.

Transamerica Mid Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Mid Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Transamerica Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Franklin Growth and Transamerica Mid

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

The idea behind Franklin Growth Opportunities and Transamerica Mid Cap 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.