Correlation Between Prudential Emerging and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Prudential Emerging and Franklin Mutual 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 Prudential Emerging and Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Emerging Markets and Franklin Mutual European, you can compare the effects of market volatilities on Prudential Emerging and Franklin Mutual 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 Prudential Emerging with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Emerging and Franklin Mutual.
Diversification Opportunities for Prudential Emerging and Franklin Mutual
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prudential and Franklin is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Emerging Markets and Franklin Mutual European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual European and Prudential Emerging 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 Prudential Emerging Markets are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual European has no effect on the direction of Prudential Emerging i.e., Prudential Emerging and Franklin Mutual go up and down completely randomly.
Pair Corralation between Prudential Emerging and Franklin Mutual
Assuming the 90 days horizon Prudential Emerging is expected to generate 1.13 times less return on investment than Franklin Mutual. But when comparing it to its historical volatility, Prudential Emerging Markets is 2.03 times less risky than Franklin Mutual. It trades about 0.02 of its potential returns per unit of risk. Franklin Mutual European is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,425 in Franklin Mutual European on October 26, 2024 and sell it today you would earn a total of 16.00 from holding Franklin Mutual European or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Emerging Markets vs. Franklin Mutual European
Performance |
| Timeline |
| Prudential Emerging |
| Franklin Mutual European |
Prudential Emerging and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Emerging and Franklin Mutual
The main advantage of trading using opposite Prudential Emerging and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Emerging position performs unexpectedly, Franklin Mutual 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 Mutual will offset losses from the drop in Franklin Mutual's long position.| Prudential Emerging vs. Baron Real Estate | Prudential Emerging vs. Short Real Estate | Prudential Emerging vs. Texton Property | Prudential Emerging vs. Simt Real Estate |
| Franklin Mutual vs. Artisan Developing World | Franklin Mutual vs. Aqr Sustainable Long Short | Franklin Mutual vs. Prudential Emerging Markets | Franklin Mutual vs. Barings Emerging Markets |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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