Correlation Between Franklin Moderate and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both Franklin Moderate and Vanguard Emerging 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 Vanguard Emerging 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 Vanguard Emerging Markets, you can compare the effects of market volatilities on Franklin Moderate and Vanguard Emerging 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 Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Moderate and Vanguard Emerging.
Diversification Opportunities for Franklin Moderate and Vanguard Emerging
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Vanguard is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Moderate Allocation and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets 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 Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of Franklin Moderate i.e., Franklin Moderate and Vanguard Emerging go up and down completely randomly.
Pair Corralation between Franklin Moderate and Vanguard Emerging
Assuming the 90 days horizon Franklin Moderate Allocation is expected to generate 0.58 times more return on investment than Vanguard Emerging. However, Franklin Moderate Allocation is 1.73 times less risky than Vanguard Emerging. It trades about 0.12 of its potential returns per unit of risk. Vanguard Emerging Markets is currently generating about 0.05 per unit of risk. If you would invest 1,509 in Franklin Moderate Allocation on September 1, 2024 and sell it today you would earn a total of 120.00 from holding Franklin Moderate Allocation or generate 7.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Franklin Moderate Allocation vs. Vanguard Emerging Markets
Performance |
| Timeline |
| Franklin Moderate |
| Vanguard Emerging Markets |
Franklin Moderate and Vanguard Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Moderate and Vanguard Emerging
The main advantage of trading using opposite Franklin Moderate and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Moderate position performs unexpectedly, Vanguard Emerging 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 Vanguard Emerging will offset losses from the drop in Vanguard Emerging'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 |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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