Correlation Between American Funds and Franklin Corefolio

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Can any of the company-specific risk be diversified away by investing in both American Funds and Franklin Corefolio 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 American Funds and Franklin Corefolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Growth and Franklin Efolio Allocation, you can compare the effects of market volatilities on American Funds and Franklin Corefolio 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 American Funds with a short position of Franklin Corefolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Franklin Corefolio.

Diversification Opportunities for American Funds and Franklin Corefolio

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between American and FRANKLIN is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Growth and Franklin Efolio Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Efolio Allo and American Funds 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 American Funds Growth are associated (or correlated) with Franklin Corefolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Efolio Allo has no effect on the direction of American Funds i.e., American Funds and Franklin Corefolio go up and down completely randomly.

Pair Corralation between American Funds and Franklin Corefolio

Assuming the 90 days horizon American Funds Growth is expected to generate 1.06 times more return on investment than Franklin Corefolio. However, American Funds is 1.06 times more volatile than Franklin Efolio Allocation. It trades about 0.29 of its potential returns per unit of risk. Franklin Efolio Allocation is currently generating about 0.3 per unit of risk. If you would invest  2,627  in American Funds Growth on September 4, 2024 and sell it today you would earn a total of  119.00  from holding American Funds Growth or generate 4.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy95.24%
ValuesDaily Returns

American Funds Growth  vs.  Franklin Efolio Allocation

 Performance 
       Timeline  
American Funds Growth 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Growth are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, American Funds may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Franklin Efolio Allo 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Efolio Allocation are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Franklin Corefolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American Funds and Franklin Corefolio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Funds and Franklin Corefolio

The main advantage of trading using opposite American Funds and Franklin Corefolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Franklin Corefolio 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 Corefolio will offset losses from the drop in Franklin Corefolio's long position.
The idea behind American Funds Growth and Franklin Efolio Allocation 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.
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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