Correlation Between New World and Franklin Growth
Can any of the company-specific risk be diversified away by investing in both New World and Franklin Growth 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 New World and Franklin Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New World Fund and Franklin Growth Fund, you can compare the effects of market volatilities on New World and Franklin Growth 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 New World with a short position of Franklin Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Franklin Growth.
Diversification Opportunities for New World and Franklin Growth
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and FRANKLIN is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Franklin Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Growth and New World 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 New World Fund are associated (or correlated) with Franklin Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Growth has no effect on the direction of New World i.e., New World and Franklin Growth go up and down completely randomly.
Pair Corralation between New World and Franklin Growth
Assuming the 90 days horizon New World is expected to generate 1.23 times less return on investment than Franklin Growth. But when comparing it to its historical volatility, New World Fund is 1.41 times less risky than Franklin Growth. It trades about 0.05 of its potential returns per unit of risk. Franklin Growth Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8,889 in Franklin Growth Fund on December 1, 2024 and sell it today you would earn a total of 2,128 from holding Franklin Growth Fund or generate 23.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Fund vs. Franklin Growth Fund
Performance |
| Timeline |
| New World Fund |
| Franklin Growth |
New World and Franklin Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Franklin Growth
The main advantage of trading using opposite New World and Franklin Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Franklin Growth 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 Franklin Growth will offset losses from the drop in Franklin Growth's long position.| New World vs. Transamerica Financial Life | New World vs. Financial Services Portfolio | New World vs. John Hancock Financial | New World vs. Vanguard Financials Index |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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