Correlation Between Franklin Strategic and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Franklin Strategic and Franklin Mutual 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 Strategic and Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Strategic Income and Franklin Mutual Shares, you can compare the effects of market volatilities on Franklin Strategic and Franklin Mutual 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 Strategic with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Strategic and Franklin Mutual.
Diversification Opportunities for Franklin Strategic and Franklin Mutual
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 Strategic Income and Franklin Mutual Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Shares and Franklin Strategic 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 Strategic Income are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Shares has no effect on the direction of Franklin Strategic i.e., Franklin Strategic and Franklin Mutual go up and down completely randomly.
Pair Corralation between Franklin Strategic and Franklin Mutual
Assuming the 90 days horizon Franklin Strategic Income is expected to generate 0.32 times more return on investment than Franklin Mutual. However, Franklin Strategic Income is 3.15 times less risky than Franklin Mutual. It trades about 0.08 of its potential returns per unit of risk. Franklin Mutual Shares is currently generating about 0.02 per unit of risk. If you would invest 749.00 in Franklin Strategic Income on November 2, 2024 and sell it today you would earn a total of 73.00 from holding Franklin Strategic Income or generate 9.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Strategic Income vs. Franklin Mutual Shares
Performance |
| Timeline |
| Franklin Strategic Income |
| Franklin Mutual Shares |
Franklin Strategic and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Strategic and Franklin Mutual
The main advantage of trading using opposite Franklin Strategic and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Strategic position performs unexpectedly, Franklin Mutual 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 Mutual will offset losses from the drop in Franklin Mutual's long position.| Franklin Strategic vs. Ultra Short Fixed Income | Franklin Strategic vs. Oakhurst Short Duration | Franklin Strategic vs. Cmg Ultra Short | Franklin Strategic vs. Nuveen Short Term |
| Franklin Mutual vs. Templeton Growth Fund | Franklin Mutual vs. Franklin Mutual Global | Franklin Mutual vs. Franklin Income Fund | Franklin Mutual vs. Franklin Rising Dividends |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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