Correlation Between Franklin International and Fidelity International
Can any of the company-specific risk be diversified away by investing in both Franklin International and Fidelity International 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 International and Fidelity International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin International Growth and Fidelity International Growth, you can compare the effects of market volatilities on Franklin International and Fidelity International 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 International with a short position of Fidelity International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin International and Fidelity International.
Diversification Opportunities for Franklin International and Fidelity International
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and Fidelity is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Franklin International Growth and Fidelity International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity International and Franklin International 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 International Growth are associated (or correlated) with Fidelity International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity International has no effect on the direction of Franklin International i.e., Franklin International and Fidelity International go up and down completely randomly.
Pair Corralation between Franklin International and Fidelity International
Assuming the 90 days horizon Franklin International is expected to generate 1.58 times less return on investment than Fidelity International. In addition to that, Franklin International is 1.26 times more volatile than Fidelity International Growth. It trades about 0.03 of its total potential returns per unit of risk. Fidelity International Growth is currently generating about 0.06 per unit of volatility. If you would invest 1,668 in Fidelity International Growth on September 4, 2024 and sell it today you would earn a total of 435.00 from holding Fidelity International Growth or generate 26.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin International Growth vs. Fidelity International Growth
Performance |
| Timeline |
| Franklin International |
| Fidelity International |
Franklin International and Fidelity International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin International and Fidelity International
The main advantage of trading using opposite Franklin International and Fidelity International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin International position performs unexpectedly, Fidelity International 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 Fidelity International will offset losses from the drop in Fidelity International's long position.The idea behind Franklin International Growth and Fidelity International Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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