Correlation Between Franklin Mutual and Oakmark Global
Can any of the company-specific risk be diversified away by investing in both Franklin Mutual and Oakmark Global 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 Mutual and Oakmark Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Mutual Global and Oakmark Global Select, you can compare the effects of market volatilities on Franklin Mutual and Oakmark Global 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 Mutual with a short position of Oakmark Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Oakmark Global.
Diversification Opportunities for Franklin Mutual and Oakmark Global
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Oakmark is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and Oakmark Global Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark Global Select and Franklin Mutual 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 Mutual Global are associated (or correlated) with Oakmark Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oakmark Global Select has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Oakmark Global go up and down completely randomly.
Pair Corralation between Franklin Mutual and Oakmark Global
Assuming the 90 days horizon Franklin Mutual is expected to generate 1.09 times less return on investment than Oakmark Global. But when comparing it to its historical volatility, Franklin Mutual Global is 1.03 times less risky than Oakmark Global. It trades about 0.05 of its potential returns per unit of risk. Oakmark Global Select is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,044 in Oakmark Global Select on August 30, 2024 and sell it today you would earn a total of 263.00 from holding Oakmark Global Select or generate 12.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Mutual Global vs. Oakmark Global Select
Performance |
| Timeline |
| Franklin Mutual Global |
| Oakmark Global Select |
Franklin Mutual and Oakmark Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Mutual and Oakmark Global
The main advantage of trading using opposite Franklin Mutual and Oakmark Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Mutual position performs unexpectedly, Oakmark Global 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 Oakmark Global will offset losses from the drop in Oakmark Global's long position.The idea behind Franklin Mutual Global and Oakmark Global Select 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.
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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