Correlation Between Franklin Servative and Franklin Mutual

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

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

Diversification Opportunities for Franklin Servative and Franklin Mutual

0.63

Correlation Coefficient

Franklin Servative  Franklin Mutual

Poor diversification

The 3 months correlation between Franklin and Franklin is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Servative Allocation and Franklin Mutual Beacon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Beacon and Franklin Servative 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 Servative Allocation are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Beacon has no effect on the direction of Franklin Servative i.e., Franklin Servative and Franklin Mutual go up and down completely randomly.

Pair Corralation between Franklin Servative and Franklin Mutual

Assuming the 90 days horizon Franklin Servative Allocation is expected to generate 0.42 times more return on investment than Franklin Mutual. However, Franklin Servative Allocation is 2.36 times less risky than Franklin Mutual. It trades about -0.06 of its potential returns per unit of risk. Franklin Mutual Beacon is currently generating about -0.16 per unit of risk. If you would invest  1,419  in Franklin Servative Allocation on September 23, 2024 and sell it today you would lose (20.00) from holding Franklin Servative Allocation or give up 1.41% of portfolio value over 90 days.

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

Franklin Servative Allocation  vs.  Franklin Mutual Beacon

Franklin Servative

Risk-Adjusted Performance

0 of 100

Very Weak

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

Franklin Mutual Beacon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Mutual Beacon has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Servative and Franklin Mutual

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

The idea behind Franklin Servative Allocation and Franklin Mutual Beacon 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.