Correlation Between American Funds and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Franklin Mutual 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 Mutual Shares, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Franklin Mutual.
Diversification Opportunities for American Funds and Franklin Mutual
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Franklin is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Growth 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 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 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 American Funds i.e., American Funds and Franklin Mutual go up and down completely randomly.
Pair Corralation between American Funds and Franklin Mutual
Assuming the 90 days horizon American Funds Growth is expected to under-perform the Franklin Mutual. In addition to that, American Funds is 1.43 times more volatile than Franklin Mutual Shares. It trades about -0.07 of its total potential returns per unit of risk. Franklin Mutual Shares is currently generating about -0.08 per unit of volatility. If you would invest 2,623 in Franklin Mutual Shares on November 27, 2024 and sell it today you would lose (24.00) from holding Franklin Mutual Shares or give up 0.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Growth vs. Franklin Mutual Shares
Performance |
| Timeline |
| American Funds Growth |
| Franklin Mutual Shares |
American Funds and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Franklin Mutual
The main advantage of trading using opposite American Funds and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Collegeadvantage 529 Savings | American Funds vs. T Rowe Price | American Funds vs. Pace Select Advisors | American Funds vs. Prudential Emerging Markets |
| Franklin Mutual vs. Franklin Mutual Quest | Franklin Mutual vs. Franklin Mutual Global | Franklin Mutual vs. Franklin Mutual Beacon | Franklin Mutual vs. Franklin Mutual European |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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