Correlation Between Franklin Emerging and American Century
Can any of the company-specific risk be diversified away by investing in both Franklin Emerging and American Century 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 Emerging and American Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Emerging Market and American Century Equity, you can compare the effects of market volatilities on Franklin Emerging and American Century 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 Emerging with a short position of American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Emerging and American Century.
Diversification Opportunities for Franklin Emerging and American Century
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and American is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Emerging Market and American Century Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Equity and Franklin 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 Franklin Emerging Market are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century Equity has no effect on the direction of Franklin Emerging i.e., Franklin Emerging and American Century go up and down completely randomly.
Pair Corralation between Franklin Emerging and American Century
Assuming the 90 days horizon Franklin Emerging is expected to generate 2.07 times less return on investment than American Century. But when comparing it to its historical volatility, Franklin Emerging Market is 2.56 times less risky than American Century. It trades about 0.13 of its potential returns per unit of risk. American Century Equity is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 944.00 in American Century Equity on August 25, 2024 and sell it today you would earn a total of 21.00 from holding American Century Equity or generate 2.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Emerging Market vs. American Century Equity
Performance |
| Timeline |
| Franklin Emerging Market |
| American Century Equity |
Franklin Emerging and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Emerging and American Century
The main advantage of trading using opposite Franklin Emerging and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Emerging position performs unexpectedly, American Century 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 American Century will offset losses from the drop in American Century's long position.| Franklin Emerging vs. Wells Fargo Advantage | Franklin Emerging vs. Gabelli Gold Fund | Franklin Emerging vs. Sprott Gold Equity | Franklin Emerging vs. Fidelity Advisor Gold |
| American Century vs. Nasdaq 100 2x Strategy | American Century vs. Franklin Emerging Market | American Century vs. Pnc Emerging Markets | American Century vs. Ashmore 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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