Correlation Between Franklin Mutual and Emerging Markets

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

Diversification Opportunities for Franklin Mutual and Emerging Markets

0.62

Correlation Coefficient

Franklin Mutual  Emerging Markets

Poor diversification

The 3 months correlation between Franklin and Emerging is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and Emerging Markets Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Bond 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 Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets Bond has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Emerging Markets go up and down completely randomly.

Pair Corralation between Franklin Mutual and Emerging Markets

Assuming the 90 days horizon Franklin Mutual Global is expected to generate 1.97 times more return on investment than Emerging Markets. However, Franklin Mutual is 1.97 times more volatile than Emerging Markets Bond. It trades about 0.06 of its potential returns per unit of risk. Emerging Markets Bond is currently generating about 0.1 per unit of risk. If you would invest  2,587  in Franklin Mutual Global on September 14, 2024 and sell it today you would earn a total of  569.00  from holding Franklin Mutual Global or generate 21.99% return on investment over 90 days.

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

Franklin Mutual Global  vs.  Emerging Markets Bond

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.

Emerging Markets Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emerging Markets Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Emerging Markets 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 Emerging Markets

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

The idea behind Franklin Mutual Global and Emerging Markets Bond 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.