Correlation Between Franklin Strategic and Western Asset
Can any of the company-specific risk be diversified away by investing in both Franklin Strategic and Western Asset 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 Strategic and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Strategic Series and Western Asset High, you can compare the effects of market volatilities on Franklin Strategic and Western Asset 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 Strategic with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Strategic and Western Asset.
Diversification Opportunities for Franklin Strategic and Western Asset
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Western is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Strategic Series and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Franklin Strategic 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 Strategic Series are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of Franklin Strategic i.e., Franklin Strategic and Western Asset go up and down completely randomly.
Pair Corralation between Franklin Strategic and Western Asset
Assuming the 90 days horizon Franklin Strategic is expected to generate 1.05 times less return on investment than Western Asset. But when comparing it to its historical volatility, Franklin Strategic Series is 1.09 times less risky than Western Asset. It trades about 0.22 of its potential returns per unit of risk. Western Asset High is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 659.00 in Western Asset High on September 3, 2024 and sell it today you would earn a total of 38.00 from holding Western Asset High or generate 5.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Strategic Series vs. Western Asset High
Performance |
| Timeline |
| Franklin Strategic Series |
| Western Asset High |
Franklin Strategic and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Strategic and Western Asset
The main advantage of trading using opposite Franklin Strategic and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Strategic position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Franklin Strategic vs. Matson Money Equity | Franklin Strategic vs. Elfun Government Money | Franklin Strategic vs. Lord Abbett Emerging | Franklin Strategic vs. Schwab Treasury Money |
| Western Asset vs. Legg Mason Partners | Western Asset vs. T Rowe Price | Western Asset vs. T Rowe Price | Western Asset vs. John Hancock Funds |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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