Correlation Between Franklin Moderate and Capital World
Can any of the company-specific risk be diversified away by investing in both Franklin Moderate and Capital World 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 Moderate and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Moderate Allocation and Capital World Bond, you can compare the effects of market volatilities on Franklin Moderate and Capital World 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 Moderate with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Moderate and Capital World.
Diversification Opportunities for Franklin Moderate and Capital World
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Franklin and Capital is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Moderate Allocation and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond and Franklin Moderate 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 Moderate Allocation are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Franklin Moderate i.e., Franklin Moderate and Capital World go up and down completely randomly.
Pair Corralation between Franklin Moderate and Capital World
Assuming the 90 days horizon Franklin Moderate Allocation is expected to generate 1.41 times more return on investment than Capital World. However, Franklin Moderate is 1.41 times more volatile than Capital World Bond. It trades about 0.1 of its potential returns per unit of risk. Capital World Bond is currently generating about 0.04 per unit of risk. If you would invest 1,495 in Franklin Moderate Allocation on September 3, 2024 and sell it today you would earn a total of 125.00 from holding Franklin Moderate Allocation or generate 8.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Moderate Allocation vs. Capital World Bond
Performance |
| Timeline |
| Franklin Moderate |
| Capital World Bond |
Franklin Moderate and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Moderate and Capital World
The main advantage of trading using opposite Franklin Moderate and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Moderate position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Franklin Moderate vs. Siit High Yield | Franklin Moderate vs. Pgim High Yield | Franklin Moderate vs. Pace High Yield | Franklin Moderate vs. Pioneer High Yield |
| Capital World vs. Calvert High Yield | Capital World vs. Needham Aggressive Growth | Capital World vs. Western Asset High | Capital World vs. Ab High Income |
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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