Correlation Between Franklin Income and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Franklin Income and Emerging Markets 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 Income and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Income Fund and The Emerging Markets, you can compare the effects of market volatilities on Franklin Income and Emerging Markets 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 Income with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Income and Emerging Markets.
Diversification Opportunities for Franklin Income and Emerging Markets
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Emerging is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Income Fund and The Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Franklin Income 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 Income Fund are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Franklin Income i.e., Franklin Income and Emerging Markets go up and down completely randomly.
Pair Corralation between Franklin Income and Emerging Markets
Assuming the 90 days horizon Franklin Income Fund is expected to under-perform the Emerging Markets. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin Income Fund is 2.42 times less risky than Emerging Markets. The mutual fund trades about -0.07 of its potential returns per unit of risk. The The Emerging Markets is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,891 in The Emerging Markets on September 13, 2024 and sell it today you would earn a total of 21.00 from holding The Emerging Markets or generate 1.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Income Fund vs. The Emerging Markets
Performance |
| Timeline |
| Franklin Income |
| Emerging Markets |
Franklin Income and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Income and Emerging Markets
The main advantage of trading using opposite Franklin Income and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Income position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Franklin Income vs. Franklin Mutual Beacon | Franklin Income vs. Templeton Developing Markets | Franklin Income vs. Franklin Mutual Global | Franklin Income vs. Franklin Mutual Global |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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