Correlation Between Franklin Growth and Franklin Efolio

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

Diversification Opportunities for Franklin Growth and Franklin Efolio

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Franklin and Franklin is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Growth Fund 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 Franklin Growth 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 Growth Fund are associated (or correlated) with Franklin Efolio. 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 Franklin Growth i.e., Franklin Growth and Franklin Efolio go up and down completely randomly.

Pair Corralation between Franklin Growth and Franklin Efolio

Assuming the 90 days horizon Franklin Growth Fund is expected to under-perform the Franklin Efolio. In addition to that, Franklin Growth is 1.35 times more volatile than Franklin Efolio Allocation. It trades about -0.04 of its total potential returns per unit of risk. Franklin Efolio Allocation is currently generating about 0.02 per unit of volatility. If you would invest  2,290  in Franklin Efolio Allocation on October 7, 2024 and sell it today you would earn a total of  50.00  from holding Franklin Efolio Allocation or generate 2.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Franklin Growth Fund  vs.  Franklin Efolio Allocation

 Performance 
       Timeline  
Franklin Growth 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Franklin Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.
Franklin Efolio Allo 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Franklin Efolio Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin Efolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Growth and Franklin Efolio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Franklin Growth and Franklin Efolio

The main advantage of trading using opposite Franklin Growth and Franklin Efolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Growth position performs unexpectedly, Franklin Efolio 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 Efolio will offset losses from the drop in Franklin Efolio's long position.
The idea behind Franklin Growth Fund 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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