Correlation Between Franklin Emerging and Capital World
Can any of the company-specific risk be diversified away by investing in both Franklin Emerging and Capital World 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 Capital World 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 Capital World Growth, you can compare the effects of market volatilities on Franklin Emerging and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Emerging and Capital World.
Diversification Opportunities for Franklin Emerging and Capital World
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Capital is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Emerging Market and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Franklin Emerging i.e., Franklin Emerging and Capital World go up and down completely randomly.
Pair Corralation between Franklin Emerging and Capital World
Assuming the 90 days horizon Franklin Emerging is expected to generate 1.74 times less return on investment than Capital World. But when comparing it to its historical volatility, Franklin Emerging Market is 2.66 times less risky than Capital World. It trades about 0.25 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 6,677 in Capital World Growth on September 3, 2024 and sell it today you would earn a total of 134.00 from holding Capital World Growth or generate 2.01% 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. Capital World Growth
Performance |
| Timeline |
| Franklin Emerging Market |
| Capital World Growth |
Franklin Emerging and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Emerging and Capital World
The main advantage of trading using opposite Franklin Emerging and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Emerging position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Franklin Emerging vs. Iaadx | Franklin Emerging vs. Sei Daily Income | Franklin Emerging vs. Fa 529 Aggressive | Franklin Emerging vs. Arrow Managed Futures |
| Capital World vs. Calamos Market Neutral | Capital World vs. Fundvantage Trust | Capital World vs. Morgan Stanley Emerging | Capital World vs. Ep 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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