Correlation Between American Funds and Franklin Growth
Can any of the company-specific risk be diversified away by investing in both American Funds and Franklin Growth 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 Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2040 and Franklin Growth Opportunities, you can compare the effects of market volatilities on American Funds and Franklin Growth 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 Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Franklin Growth.
Diversification Opportunities for American Funds and Franklin Growth
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Franklin is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2040 and Franklin Growth Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Growth Oppo 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 2040 are associated (or correlated) with Franklin Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Growth Oppo has no effect on the direction of American Funds i.e., American Funds and Franklin Growth go up and down completely randomly.
Pair Corralation between American Funds and Franklin Growth
Assuming the 90 days horizon American Funds is expected to generate 2.62 times less return on investment than Franklin Growth. But when comparing it to its historical volatility, American Funds 2040 is 2.03 times less risky than Franklin Growth. It trades about 0.1 of its potential returns per unit of risk. Franklin Growth Opportunities is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 6,140 in Franklin Growth Opportunities on August 29, 2024 and sell it today you would earn a total of 211.00 from holding Franklin Growth Opportunities or generate 3.44% 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 2040 vs. Franklin Growth Opportunities
Performance |
| Timeline |
| American Funds 2040 |
| Franklin Growth Oppo |
American Funds and Franklin Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Franklin Growth
The main advantage of trading using opposite American Funds and Franklin Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Franklin Growth 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 Growth will offset losses from the drop in Franklin Growth's long position.| American Funds vs. Alger Health Sciences | American Funds vs. Live Oak Health | American Funds vs. The Gabelli Healthcare | American Funds vs. Baillie Gifford Health |
| Franklin Growth vs. Abr 7525 Volatility | Franklin Growth vs. Scharf Global Opportunity | Franklin Growth vs. Arrow Managed Futures | Franklin Growth vs. Aam Select Income |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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