Correlation Between Franklin and L Abbett
Can any of the company-specific risk be diversified away by investing in both Franklin and L Abbett 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 and L Abbett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Government Money and L Abbett Growth, you can compare the effects of market volatilities on Franklin and L Abbett 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 with a short position of L Abbett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin and L Abbett.
Diversification Opportunities for Franklin and L Abbett
Poor diversification
The 3 months correlation between Franklin and LGLVX is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and L Abbett Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Abbett Growth and Franklin 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 Government Money are associated (or correlated) with L Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Abbett Growth has no effect on the direction of Franklin i.e., Franklin and L Abbett go up and down completely randomly.
Pair Corralation between Franklin and L Abbett
Assuming the 90 days horizon Franklin is expected to generate 11.76 times less return on investment than L Abbett. But when comparing it to its historical volatility, Franklin Government Money is 11.57 times less risky than L Abbett. It trades about 0.13 of its potential returns per unit of risk. L Abbett Growth is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 4,057 in L Abbett Growth on August 31, 2024 and sell it today you would earn a total of 1,023 from holding L Abbett Growth or generate 25.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Government Money vs. L Abbett Growth
Performance |
| Timeline |
| Franklin Government Money |
| L Abbett Growth |
Franklin and L Abbett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin and L Abbett
The main advantage of trading using opposite Franklin and L Abbett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin position performs unexpectedly, L Abbett 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 L Abbett will offset losses from the drop in L Abbett's long position.| Franklin vs. Vanguard Total Stock | Franklin vs. Vanguard 500 Index | Franklin vs. Vanguard Total Stock | Franklin vs. Vanguard Total Stock |
| L Abbett vs. Legg Mason Partners | L Abbett vs. Pimco Funds | L Abbett vs. Franklin Government Money | L Abbett vs. Ashmore Emerging Markets |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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