Correlation Between Franklin Government and Mainstay Moderate

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

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

Diversification Opportunities for Franklin Government and Mainstay Moderate

0.06

Correlation Coefficient

Franklin Government  Mainstay Moderate

Significant diversification

The 3 months correlation between Franklin and Mainstay is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Mainstay Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Moderate and Franklin Government 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 Government Money are associated (or correlated) with Mainstay Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Moderate has no effect on the direction of Franklin Government i.e., Franklin Government and Mainstay Moderate go up and down completely randomly.

Pair Corralation between Franklin Government and Mainstay Moderate

Assuming the 90 days horizon Franklin Government Money is expected to generate 0.26 times more return on investment than Mainstay Moderate. However, Franklin Government Money is 3.8 times less risky than Mainstay Moderate. It trades about 0.13 of its potential returns per unit of risk. Mainstay Moderate Allocation is currently generating about -0.02 per unit of risk. If you would invest  99.00  in Franklin Government Money on September 27, 2024 and sell it today you would earn a total of  1.00  from holding Franklin Government Money or generate 1.01% return on investment over 90 days.

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

Franklin Government Money  vs.  Mainstay Moderate Allocation

Franklin Government Money

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Government Money are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mainstay Moderate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mainstay Moderate Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Mainstay Moderate 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 Government and Mainstay Moderate

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

The idea behind Franklin Government Money and Mainstay Moderate Allocation 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.