Correlation Between Franklin Mutual and Multimanager Lifestyle
Can any of the company-specific risk be diversified away by investing in both Franklin Mutual and Multimanager Lifestyle 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 Franklin Mutual and Multimanager Lifestyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Mutual Shares and Multimanager Lifestyle Aggressive, you can compare the effects of market volatilities on Franklin Mutual and Multimanager Lifestyle 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 Franklin Mutual with a short position of Multimanager Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Multimanager Lifestyle.
Diversification Opportunities for Franklin Mutual and Multimanager Lifestyle
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Multimanager is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Shares and Multimanager Lifestyle Aggress in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle and Franklin Mutual 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 Franklin Mutual Shares are associated (or correlated) with Multimanager Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multimanager Lifestyle has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Multimanager Lifestyle go up and down completely randomly.
Pair Corralation between Franklin Mutual and Multimanager Lifestyle
Assuming the 90 days horizon Franklin Mutual Shares is expected to generate 0.9 times more return on investment than Multimanager Lifestyle. However, Franklin Mutual Shares is 1.11 times less risky than Multimanager Lifestyle. It trades about -0.05 of its potential returns per unit of risk. Multimanager Lifestyle Aggressive is currently generating about -0.21 per unit of risk. If you would invest 2,595 in Franklin Mutual Shares on December 8, 2024 and sell it today you would lose (20.00) from holding Franklin Mutual Shares or give up 0.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Mutual Shares vs. Multimanager Lifestyle Aggress
Performance |
| Timeline |
| Franklin Mutual Shares |
| Multimanager Lifestyle |
Franklin Mutual and Multimanager Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Mutual and Multimanager Lifestyle
The main advantage of trading using opposite Franklin Mutual and Multimanager Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Mutual position performs unexpectedly, Multimanager Lifestyle 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 Multimanager Lifestyle will offset losses from the drop in Multimanager Lifestyle's long position.| Franklin Mutual vs. Franklin Mutual Quest | ||
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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