Correlation Between Franklin and American Funds
Can any of the company-specific risk be diversified away by investing in both Franklin and American Funds 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 American Funds 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 American Funds 2050, you can compare the effects of market volatilities on Franklin and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin and American Funds.
Diversification Opportunities for Franklin and American Funds
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and American is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and American Funds 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2050 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2050 has no effect on the direction of Franklin i.e., Franklin and American Funds go up and down completely randomly.
Pair Corralation between Franklin and American Funds
If you would invest 2,149 in American Funds 2050 on September 2, 2024 and sell it today you would earn a total of 65.00 from holding American Funds 2050 or generate 3.02% 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. American Funds 2050
Performance |
| Timeline |
| Franklin Government Money |
| American Funds 2050 |
Franklin and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin and American Funds
The main advantage of trading using opposite Franklin and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Franklin vs. Vanguard Total Stock | Franklin vs. Vanguard 500 Index | Franklin vs. Vanguard Total Stock | Franklin vs. Vanguard Total Stock |
| American Funds vs. Transamerica Funds | American Funds vs. Franklin Government Money | American Funds vs. Ashmore Emerging Markets | American Funds vs. Cref Money Market |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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