Correlation Between Franklin Mutual and Longleaf Partners

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

Diversification Opportunities for Franklin Mutual and Longleaf Partners

0.18

Correlation Coefficient

Franklin Mutual  Longleaf Partners

Average diversification

The 3 months correlation between Franklin and Longleaf is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and Longleaf Partners Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners Small 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 Longleaf Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longleaf Partners Small has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Longleaf Partners go up and down completely randomly.

Pair Corralation between Franklin Mutual and Longleaf Partners

Assuming the 90 days horizon Franklin Mutual Global is expected to under-perform the Longleaf Partners. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin Mutual Global is 1.33 times less risky than Longleaf Partners. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Longleaf Partners Small Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,731  in Longleaf Partners Small Cap on September 14, 2024 and sell it today you would earn a total of  126.00  from holding Longleaf Partners Small Cap or generate 4.61% return on investment over 90 days.

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

Franklin Mutual Global  vs.  Longleaf Partners Small Cap

Franklin Mutual Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Mutual Global 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.

Longleaf Partners Small

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Longleaf Partners Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Longleaf Partners 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 Mutual and Longleaf Partners

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

The idea behind Franklin Mutual Global and Longleaf Partners Small 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.