Correlation Between Franklin Federal and Franklin Growth
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Franklin Growth 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 Federal and Franklin Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Federal Limited Term and Franklin Growth Fund, you can compare the effects of market volatilities on Franklin Federal and Franklin Growth 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 Federal with a short position of Franklin Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Franklin Growth.
Diversification Opportunities for Franklin Federal and Franklin Growth
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Franklin and FRANKLIN is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Limited Term and Franklin Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Growth and Franklin Federal 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 Federal Limited Term are associated (or correlated) with Franklin Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Growth has no effect on the direction of Franklin Federal i.e., Franklin Federal and Franklin Growth go up and down completely randomly.
Pair Corralation between Franklin Federal and Franklin Growth
Assuming the 90 days horizon Franklin Federal is expected to generate 3.33 times less return on investment than Franklin Growth. But when comparing it to its historical volatility, Franklin Federal Limited Term is 6.88 times less risky than Franklin Growth. It trades about 0.2 of its potential returns per unit of risk. Franklin Growth Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 12,303 in Franklin Growth Fund on August 29, 2024 and sell it today you would earn a total of 241.00 from holding Franklin Growth Fund or generate 1.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Franklin Federal Limited Term vs. Franklin Growth Fund
Performance |
| Timeline |
| Franklin Federal Lim |
| Franklin Growth |
Franklin Federal and Franklin Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Franklin Growth
The main advantage of trading using opposite Franklin Federal and Franklin Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Franklin Growth 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 Growth will offset losses from the drop in Franklin Growth's long position.The idea behind Franklin Federal Limited Term and Franklin Growth Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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