Correlation Between Franklin Moderate and Moderately Aggressive
Can any of the company-specific risk be diversified away by investing in both Franklin Moderate and Moderately Aggressive 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 Moderately Aggressive 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 Moderately Aggressive Balanced, you can compare the effects of market volatilities on Franklin Moderate and Moderately Aggressive 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 Moderately Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Moderate and Moderately Aggressive.
Diversification Opportunities for Franklin Moderate and Moderately Aggressive
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Moderately is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Moderate Allocation and Moderately Aggressive Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderately Aggressive 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 Moderately Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderately Aggressive has no effect on the direction of Franklin Moderate i.e., Franklin Moderate and Moderately Aggressive go up and down completely randomly.
Pair Corralation between Franklin Moderate and Moderately Aggressive
Assuming the 90 days horizon Franklin Moderate is expected to generate 1.14 times less return on investment than Moderately Aggressive. But when comparing it to its historical volatility, Franklin Moderate Allocation is 1.18 times less risky than Moderately Aggressive. It trades about 0.12 of its potential returns per unit of risk. Moderately Aggressive Balanced is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,144 in Moderately Aggressive Balanced on September 1, 2024 and sell it today you would earn a total of 103.00 from holding Moderately Aggressive Balanced or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Franklin Moderate Allocation vs. Moderately Aggressive Balanced
Performance |
| Timeline |
| Franklin Moderate |
| Moderately Aggressive |
Franklin Moderate and Moderately Aggressive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Moderate and Moderately Aggressive
The main advantage of trading using opposite Franklin Moderate and Moderately Aggressive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Moderate position performs unexpectedly, Moderately Aggressive 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 Moderately Aggressive will offset losses from the drop in Moderately Aggressive's long position.| Franklin Moderate vs. Jennison Natural Resources | Franklin Moderate vs. Oil Gas Ultrasector | Franklin Moderate vs. Clearbridge Energy Mlp | Franklin Moderate vs. Alpsalerian Energy Infrastructure |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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