Correlation Between Focused International and Franklin Moderate
Can any of the company-specific risk be diversified away by investing in both Focused International and Franklin Moderate 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 Focused International and Franklin Moderate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Focused International Growth and Franklin Moderate Allocation, you can compare the effects of market volatilities on Focused International and Franklin Moderate 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 Focused International with a short position of Franklin Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focused International and Franklin Moderate.
Diversification Opportunities for Focused International and Franklin Moderate
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Focused and Franklin is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Focused International Growth and Franklin Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Moderate and Focused International 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 Focused International Growth are associated (or correlated) with Franklin Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Moderate has no effect on the direction of Focused International i.e., Focused International and Franklin Moderate go up and down completely randomly.
Pair Corralation between Focused International and Franklin Moderate
Assuming the 90 days horizon Focused International is expected to generate 6.67 times less return on investment than Franklin Moderate. In addition to that, Focused International is 1.97 times more volatile than Franklin Moderate Allocation. It trades about 0.03 of its total potential returns per unit of risk. Franklin Moderate Allocation is currently generating about 0.35 per unit of volatility. If you would invest 1,578 in Franklin Moderate Allocation on September 1, 2024 and sell it today you would earn a total of 51.00 from holding Franklin Moderate Allocation or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Focused International Growth vs. Franklin Moderate Allocation
Performance |
| Timeline |
| Focused International |
| Franklin Moderate |
Focused International and Franklin Moderate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Focused International and Franklin Moderate
The main advantage of trading using opposite Focused International and Franklin Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focused International position performs unexpectedly, Franklin Moderate 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 Moderate will offset losses from the drop in Franklin Moderate's long position.| Focused International vs. Aqr Long Short Equity | Focused International vs. Vanguard Developed Markets | Focused International vs. Origin Emerging Markets | Focused International vs. Pnc Emerging Markets |
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Check out your portfolio center.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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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