Correlation Between Balanced Allocation and Franklin Moderate
Can any of the company-specific risk be diversified away by investing in both Balanced Allocation and Franklin Moderate 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 Balanced Allocation and Franklin Moderate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Allocation Fund and Franklin Moderate Allocation, you can compare the effects of market volatilities on Balanced Allocation and Franklin Moderate 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 Balanced Allocation with a short position of Franklin Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Allocation and Franklin Moderate.
Diversification Opportunities for Balanced Allocation and Franklin Moderate
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Balanced and Franklin is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Allocation Fund and Franklin Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Moderate and Balanced Allocation 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 Balanced Allocation Fund are associated (or correlated) with Franklin Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Moderate has no effect on the direction of Balanced Allocation i.e., Balanced Allocation and Franklin Moderate go up and down completely randomly.
Pair Corralation between Balanced Allocation and Franklin Moderate
Assuming the 90 days horizon Balanced Allocation is expected to generate 4.01 times less return on investment than Franklin Moderate. But when comparing it to its historical volatility, Balanced Allocation Fund is 1.25 times less risky than Franklin Moderate. It trades about 0.02 of its potential returns per unit of risk. Franklin Moderate Allocation is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,582 in Franklin Moderate Allocation on October 26, 2024 and sell it today you would earn a total of 35.00 from holding Franklin Moderate Allocation or generate 2.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Allocation Fund vs. Franklin Moderate Allocation
Performance |
| Timeline |
| Balanced Allocation |
| Franklin Moderate |
Balanced Allocation and Franklin Moderate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Allocation and Franklin Moderate
The main advantage of trading using opposite Balanced Allocation and Franklin Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Allocation position performs unexpectedly, Franklin Moderate 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 Moderate will offset losses from the drop in Franklin Moderate's long position.| Balanced Allocation vs. The Equity Growth | Balanced Allocation vs. Rational Defensive Growth | Balanced Allocation vs. L Abbett Growth | Balanced Allocation vs. Riverparknext Century Growth |
| Franklin Moderate vs. Quantitative Longshort Equity | Franklin Moderate vs. Doubleline Core Fixed | Franklin Moderate vs. Qs Global Equity | Franklin Moderate vs. Calvert International Equity |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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