Correlation Between Franklin High and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Franklin High 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 Franklin High and Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin High Income and Franklin Mutual Quest, you can compare the effects of market volatilities on Franklin High 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 Franklin High with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin High and Franklin Mutual.
Diversification Opportunities for Franklin High and Franklin Mutual
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Franklin is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Income and Franklin Mutual Quest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Quest and Franklin High 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 High Income 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 Quest has no effect on the direction of Franklin High i.e., Franklin High and Franklin Mutual go up and down completely randomly.
Pair Corralation between Franklin High and Franklin Mutual
Assuming the 90 days horizon Franklin High is expected to generate 1.82 times less return on investment than Franklin Mutual. But when comparing it to its historical volatility, Franklin High Income is 2.45 times less risky than Franklin Mutual. It trades about 0.13 of its potential returns per unit of risk. Franklin Mutual Quest is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,421 in Franklin Mutual Quest on September 3, 2024 and sell it today you would earn a total of 104.00 from holding Franklin Mutual Quest or generate 7.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin High Income vs. Franklin Mutual Quest
Performance |
| Timeline |
| Franklin High Income |
| Franklin Mutual Quest |
Franklin High and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin High and Franklin Mutual
The main advantage of trading using opposite Franklin High and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin High 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.| Franklin High vs. Guggenheim High Yield | Franklin High vs. American Century High | Franklin High vs. Calvert High Yield | Franklin High vs. Virtus High Yield |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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