Correlation Between Franklin Emerging and Equity Income
Can any of the company-specific risk be diversified away by investing in both Franklin Emerging and Equity Income 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 Equity Income 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 Equity Income Fund, you can compare the effects of market volatilities on Franklin Emerging and Equity Income 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 Equity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Emerging and Equity Income.
Diversification Opportunities for Franklin Emerging and Equity Income
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Equity is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Emerging Market and Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Income 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 Equity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Income has no effect on the direction of Franklin Emerging i.e., Franklin Emerging and Equity Income go up and down completely randomly.
Pair Corralation between Franklin Emerging and Equity Income
Assuming the 90 days horizon Franklin Emerging is expected to generate 1.61 times less return on investment than Equity Income. But when comparing it to its historical volatility, Franklin Emerging Market is 2.15 times less risky than Equity Income. It trades about 0.19 of its potential returns per unit of risk. Equity Income Fund is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 841.00 in Equity Income Fund on September 1, 2024 and sell it today you would earn a total of 121.00 from holding Equity Income Fund or generate 14.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.47% |
| Values | Daily Returns |
Franklin Emerging Market vs. Equity Income Fund
Performance |
| Timeline |
| Franklin Emerging Market |
| Equity Income |
Franklin Emerging and Equity Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Emerging and Equity Income
The main advantage of trading using opposite Franklin Emerging and Equity Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Emerging position performs unexpectedly, Equity Income 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 Equity Income will offset losses from the drop in Equity Income's long position.| Franklin Emerging vs. Jhancock Real Estate | Franklin Emerging vs. Virtus Real Estate | Franklin Emerging vs. Dunham Real Estate | Franklin Emerging vs. Us Real Estate |
| Equity Income vs. Ep Emerging Markets | Equity Income vs. Rbc Emerging Markets | Equity Income vs. Dws Emerging Markets | Equity Income vs. Franklin Emerging Market |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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