Correlation Between Franklin Mutual and Clearbridge International

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

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

Diversification Opportunities for Franklin Mutual and Clearbridge International

0.01

Correlation Coefficient

Franklin Mutual  Clearbridge International

Significant diversification

The 3 months correlation between Franklin and Clearbridge is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Beacon and Clearbridge International Valu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge International and Franklin Mutual 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 Mutual Beacon are associated (or correlated) with Clearbridge International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge International has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Clearbridge International go up and down completely randomly.

Pair Corralation between Franklin Mutual and Clearbridge International

Assuming the 90 days horizon Franklin Mutual Beacon is expected to generate 0.7 times more return on investment than Clearbridge International. However, Franklin Mutual Beacon is 1.43 times less risky than Clearbridge International. It trades about -0.1 of its potential returns per unit of risk. Clearbridge International Value is currently generating about -0.19 per unit of risk. If you would invest  1,709  in Franklin Mutual Beacon on September 21, 2024 and sell it today you would lose (69.00) from holding Franklin Mutual Beacon or give up 4.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Franklin Mutual Beacon  vs.  Clearbridge International Valu

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 fairly strong forward indicators, Franklin Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Clearbridge International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clearbridge International Value 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 Mutual and Clearbridge International

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

The idea behind Franklin Mutual Beacon and Clearbridge International Value 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.