Correlation Between International Equity and Franklin Emerging
Can any of the company-specific risk be diversified away by investing in both International Equity and Franklin Emerging 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 International Equity and Franklin Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Equity Institutional and Franklin Emerging Market, you can compare the effects of market volatilities on International Equity and Franklin Emerging 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 International Equity with a short position of Franklin Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Franklin Emerging.
Diversification Opportunities for International Equity and Franklin Emerging
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between International and Franklin is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Instituti and Franklin Emerging Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Emerging Market and International Equity 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 International Equity Institutional are associated (or correlated) with Franklin Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Emerging Market has no effect on the direction of International Equity i.e., International Equity and Franklin Emerging go up and down completely randomly.
Pair Corralation between International Equity and Franklin Emerging
Assuming the 90 days horizon International Equity Institutional is expected to under-perform the Franklin Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Equity Institutional is 1.19 times less risky than Franklin Emerging. The mutual fund trades about -0.34 of its potential returns per unit of risk. The Franklin Emerging Market is currently generating about -0.29 of returns per unit of risk over similar time horizon. If you would invest 1,227 in Franklin Emerging Market on October 9, 2024 and sell it today you would lose (66.00) from holding Franklin Emerging Market or give up 5.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Equity Instituti vs. Franklin Emerging Market
Performance |
| Timeline |
| International Equity |
| Franklin Emerging Market |
International Equity and Franklin Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Franklin Emerging
The main advantage of trading using opposite International Equity and Franklin Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity position performs unexpectedly, Franklin Emerging 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 Emerging will offset losses from the drop in Franklin Emerging's long position.| International Equity vs. Inverse Government Long | International Equity vs. Gurtin California Muni | International Equity vs. Fidelity California Municipal | International Equity vs. Blackrock Pa Muni |
| Franklin Emerging vs. Nuveen Short Term | Franklin Emerging vs. Aamhimco Short Duration | Franklin Emerging vs. Angel Oak Ultrashort | Franklin Emerging vs. Oakhurst Short Duration |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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