Correlation Between American Funds and Franklin Moderate
Can any of the company-specific risk be diversified away by investing in both American Funds and Franklin Moderate 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 Moderate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Retirement and Franklin Moderate Allocation, you can compare the effects of market volatilities on American Funds and Franklin Moderate 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 Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Franklin Moderate.
Diversification Opportunities for American Funds and Franklin Moderate
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Franklin is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Franklin Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Moderate 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 Retirement are associated (or correlated) with Franklin Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Moderate has no effect on the direction of American Funds i.e., American Funds and Franklin Moderate go up and down completely randomly.
Pair Corralation between American Funds and Franklin Moderate
Assuming the 90 days horizon American Funds Retirement is expected to generate 0.77 times more return on investment than Franklin Moderate. However, American Funds Retirement is 1.3 times less risky than Franklin Moderate. It trades about 0.25 of its potential returns per unit of risk. Franklin Moderate Allocation is currently generating about 0.17 per unit of risk. If you would invest 1,269 in American Funds Retirement on November 22, 2024 and sell it today you would earn a total of 22.00 from holding American Funds Retirement or generate 1.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Funds Retirement vs. Franklin Moderate Allocation
Performance |
| Timeline |
| American Funds Retirement |
| Franklin Moderate |
American Funds and Franklin Moderate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Franklin Moderate
The main advantage of trading using opposite American Funds and Franklin Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Franklin Moderate 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 Moderate will offset losses from the drop in Franklin Moderate's long position.| American Funds vs. Jhancock Diversified Macro | American Funds vs. Pnc Emerging Markets | American Funds vs. Templeton Developing Markets | American Funds vs. Pace International Emerging |
| Franklin Moderate vs. Global Diversified Income | Franklin Moderate vs. Federated Hermes Conservative | Franklin Moderate vs. Jhancock Diversified Macro | Franklin Moderate vs. Aqr Diversified Arbitrage |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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