Correlation Between Franklin and Capital World
Can any of the company-specific risk be diversified away by investing in both Franklin and Capital World 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 Capital World 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 Capital World Bond, you can compare the effects of market volatilities on Franklin and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin and Capital World.
Diversification Opportunities for Franklin and Capital World
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Franklin and Capital is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Franklin i.e., Franklin and Capital World go up and down completely randomly.
Pair Corralation between Franklin and Capital World
Assuming the 90 days horizon Franklin Government Money is expected to generate 0.31 times more return on investment than Capital World. However, Franklin Government Money is 3.25 times less risky than Capital World. It trades about 0.13 of its potential returns per unit of risk. Capital World Bond is currently generating about 0.02 per unit of risk. If you would invest 92.00 in Franklin Government Money on September 2, 2024 and sell it today you would earn a total of 8.00 from holding Franklin Government Money or generate 8.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Government Money vs. Capital World Bond
Performance |
| Timeline |
| Franklin Government Money |
| Capital World Bond |
Franklin and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin and Capital World
The main advantage of trading using opposite Franklin and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Franklin vs. Vanguard Total Stock | Franklin vs. Vanguard 500 Index | Franklin vs. Vanguard Total Stock | Franklin vs. Vanguard Total Stock |
| Capital World vs. Income Fund Of | Capital World vs. New World Fund | Capital World vs. American Mutual Fund | Capital World vs. American Mutual Fund |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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