Correlation Between GM and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Franklin Mutual Shares, you can compare the effects of market volatilities on GM 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 GM with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Franklin Mutual.
Diversification Opportunities for GM and Franklin Mutual
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Franklin is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Franklin Mutual go up and down completely randomly.
Pair Corralation between GM and Franklin Mutual
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.93 times more return on investment than Franklin Mutual. However, GM is 2.93 times more volatile than Franklin Mutual Shares. It trades about 0.13 of its potential returns per unit of risk. Franklin Mutual Shares is currently generating about 0.14 per unit of risk. If you would invest 2,879 in General Motors on September 1, 2024 and sell it today you would earn a total of 2,680 from holding General Motors or generate 93.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
General Motors vs. Franklin Mutual Shares
Performance |
| Timeline |
| General Motors |
| Franklin Mutual Shares |
GM and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Franklin Mutual
The main advantage of trading using opposite GM and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.The idea behind General Motors and Franklin Mutual Shares 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.| Franklin Mutual vs. The Hartford Small | Franklin Mutual vs. Ab Small Cap | Franklin Mutual vs. Baird Smallmid Cap | Franklin Mutual vs. Artisan Small Cap |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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