Correlation Between Franklin Mutual and Mid Cap

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

Diversification Opportunities for Franklin Mutual and Mid Cap

0.12

Correlation Coefficient

Franklin Mutual  Mid Cap

Average diversification

The 3 months correlation between Franklin and Mid is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth 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 Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Growth has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Mid Cap go up and down completely randomly.

Pair Corralation between Franklin Mutual and Mid Cap

Assuming the 90 days horizon Franklin Mutual is expected to generate 41.36 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Franklin Mutual Global is 2.58 times less risky than Mid Cap. It trades about 0.02 of its potential returns per unit of risk. Mid Cap Growth is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  1,696  in Mid Cap Growth on September 12, 2024 and sell it today you would earn a total of  683.00  from holding Mid Cap Growth or generate 40.27% 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.  Mid Cap Growth

Franklin Mutual Global

Risk-Adjusted Performance

1 of 100

Insignificant

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.

Mid Cap Growth

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Mid Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin Mutual and Mid Cap

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

The idea behind Franklin Mutual Global and Mid Cap Growth 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.