Correlation Between American Funds and Franklin Emerging
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Franklin Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Growth and Franklin Emerging Market, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Franklin Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Franklin Emerging.
Diversification Opportunities for American Funds and Franklin Emerging
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Franklin is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Growth 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 American Funds 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 American Funds Growth 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 American Funds i.e., American Funds and Franklin Emerging go up and down completely randomly.
Pair Corralation between American Funds and Franklin Emerging
Assuming the 90 days horizon American Funds Growth is expected to generate 3.24 times more return on investment than Franklin Emerging. However, American Funds is 3.24 times more volatile than Franklin Emerging Market. It trades about 0.18 of its potential returns per unit of risk. Franklin Emerging Market is currently generating about 0.22 per unit of risk. If you would invest 2,726 in American Funds Growth on September 14, 2024 and sell it today you would earn a total of 68.00 from holding American Funds Growth or generate 2.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Growth vs. Franklin Emerging Market
Performance |
| Timeline |
| American Funds Growth |
| Franklin Emerging Market |
American Funds and Franklin Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Franklin Emerging
The main advantage of trading using opposite American Funds and Franklin Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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