Correlation Between Franklin Growth and Franklin Income
Can any of the company-specific risk be diversified away by investing in both Franklin Growth and Franklin 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 Growth and Franklin Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Growth Fund and Franklin Income Fund, you can compare the effects of market volatilities on Franklin Growth and Franklin 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 Growth with a short position of Franklin Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Growth and Franklin Income.
Diversification Opportunities for Franklin Growth and Franklin Income
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Franklin is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Growth Fund and Franklin Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Income and Franklin Growth 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 Growth Fund are associated (or correlated) with Franklin Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Income has no effect on the direction of Franklin Growth i.e., Franklin Growth and Franklin Income go up and down completely randomly.
Pair Corralation between Franklin Growth and Franklin Income
Assuming the 90 days horizon Franklin Growth Fund is expected to generate 2.99 times more return on investment than Franklin Income. However, Franklin Growth is 2.99 times more volatile than Franklin Income Fund. It trades about 0.18 of its potential returns per unit of risk. Franklin Income Fund is currently generating about 0.19 per unit of risk. If you would invest 13,336 in Franklin Growth Fund on November 2, 2024 and sell it today you would earn a total of 461.00 from holding Franklin Growth Fund or generate 3.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Growth Fund vs. Franklin Income Fund
Performance |
| Timeline |
| Franklin Growth |
| Franklin Income |
Franklin Growth and Franklin Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Growth and Franklin Income
The main advantage of trading using opposite Franklin Growth and Franklin Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Growth position performs unexpectedly, Franklin 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 Franklin Income will offset losses from the drop in Franklin Income's long position.| Franklin Growth vs. Wilmington Diversified Income | Franklin Growth vs. Tax Managed Mid Small | Franklin Growth vs. Stone Ridge Diversified | Franklin Growth vs. Lord Abbett Diversified |
| Franklin Income vs. Gurtin California Muni | Franklin Income vs. Virtus Seix Government | Franklin Income vs. California Municipal Portfolio | Franklin Income vs. Gamco Global Telecommunications |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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