Correlation Between Franklin and Thornburg Developing
Can any of the company-specific risk be diversified away by investing in both Franklin and Thornburg Developing 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 Thornburg Developing 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 Thornburg Developing World, you can compare the effects of market volatilities on Franklin and Thornburg Developing 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 Thornburg Developing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin and Thornburg Developing.
Diversification Opportunities for Franklin and Thornburg Developing
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Thornburg is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Thornburg Developing World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Developing 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 Thornburg Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Developing has no effect on the direction of Franklin i.e., Franklin and Thornburg Developing go up and down completely randomly.
Pair Corralation between Franklin and Thornburg Developing
Assuming the 90 days horizon Franklin is expected to generate 1.49 times less return on investment than Thornburg Developing. But when comparing it to its historical volatility, Franklin Government Money is 6.45 times less risky than Thornburg Developing. It trades about 0.12 of its potential returns per unit of risk. Thornburg Developing World is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,894 in Thornburg Developing World on August 26, 2024 and sell it today you would earn a total of 157.00 from holding Thornburg Developing World or generate 8.29% 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. Thornburg Developing World
Performance |
| Timeline |
| Franklin Government Money |
| Thornburg Developing |
Franklin and Thornburg Developing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin and Thornburg Developing
The main advantage of trading using opposite Franklin and Thornburg Developing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin position performs unexpectedly, Thornburg Developing 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 Thornburg Developing will offset losses from the drop in Thornburg Developing's long position.| Franklin vs. Vanguard Total Stock | Franklin vs. Vanguard 500 Index | Franklin vs. Vanguard Total Stock | Franklin vs. Vanguard Total Stock |
| Thornburg Developing vs. Franklin Government Money | Thornburg Developing vs. Legg Mason Partners | Thornburg Developing vs. T Rowe Price | Thornburg Developing vs. Dreyfus Institutional Reserves |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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