Correlation Between Franklin Real and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Franklin Real and Emerging Markets 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 Real and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Real Estate and Emerging Markets Fund, you can compare the effects of market volatilities on Franklin Real and Emerging Markets 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 Real with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Real and Emerging Markets.
Diversification Opportunities for Franklin Real and Emerging Markets
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Franklin and Emerging is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Real Estate and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Franklin Real 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 Real Estate are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Franklin Real i.e., Franklin Real and Emerging Markets go up and down completely randomly.
Pair Corralation between Franklin Real and Emerging Markets
Assuming the 90 days horizon Franklin Real is expected to generate 5.2 times less return on investment than Emerging Markets. In addition to that, Franklin Real is 1.16 times more volatile than Emerging Markets Fund. It trades about 0.02 of its total potential returns per unit of risk. Emerging Markets Fund is currently generating about 0.11 per unit of volatility. If you would invest 1,671 in Emerging Markets Fund on September 13, 2024 and sell it today you would earn a total of 22.00 from holding Emerging Markets Fund or generate 1.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Real Estate vs. Emerging Markets Fund
Performance |
| Timeline |
| Franklin Real Estate |
| Emerging Markets |
Franklin Real and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Real and Emerging Markets
The main advantage of trading using opposite Franklin Real and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Real position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Franklin Real vs. Franklin Natural Resources | Franklin Real vs. Franklin Small Cap | Franklin Real vs. Templeton Developing Markets | Franklin Real vs. Franklin Balance Sheet |
| Emerging Markets vs. International Developed Markets | Emerging Markets vs. Global Real Estate | Emerging Markets vs. Global Real Estate | Emerging Markets vs. Global Real Estate |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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