Correlation Between Franklin Mutual and Franklin Utilities

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

By analyzing existing cross correlation between Franklin Mutual Global and Franklin Utilities, you can compare the effects of market volatilities on Franklin Mutual and Franklin Utilities 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 Franklin Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Franklin Utilities.

Diversification Opportunities for Franklin Mutual and Franklin Utilities

0.13

Correlation Coefficient

Franklin Mutual  Franklin Utilities

Average diversification

The 3 months correlation between Franklin and Franklin is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and Franklin Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Utilities 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 Global are associated (or correlated) with Franklin Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Utilities has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Franklin Utilities go up and down completely randomly.

Pair Corralation between Franklin Mutual and Franklin Utilities

Assuming the 90 days horizon Franklin Mutual is expected to generate 11.64 times less return on investment than Franklin Utilities. But when comparing it to its historical volatility, Franklin Mutual Global is 1.47 times less risky than Franklin Utilities. It trades about 0.02 of its potential returns per unit of risk. Franklin Utilities is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,342  in Franklin Utilities on August 31, 2024 and sell it today you would earn a total of  252.00  from holding Franklin Utilities or generate 10.76% return on investment over 90 days.

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

Franklin Mutual Global  vs.  Franklin Utilities

Franklin Mutual Global

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Mutual Global are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. 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.

Franklin Utilities

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Utilities are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Franklin Utilities may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Franklin Mutual and Franklin Utilities

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

The idea behind Franklin Mutual Global and Franklin Utilities 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.