Correlation Between Washington Mutual and Franklin Growth
Can any of the company-specific risk be diversified away by investing in both Washington Mutual 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 Washington Mutual and Franklin Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Washington Mutual Investors and Franklin Growth Opportunities, you can compare the effects of market volatilities on Washington Mutual 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 Washington Mutual with a short position of Franklin Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and Franklin Growth.
Diversification Opportunities for Washington Mutual and Franklin Growth
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Washington and Franklin is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors 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 Washington 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 Washington Mutual Investors 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 Washington Mutual i.e., Washington Mutual and Franklin Growth go up and down completely randomly.
Pair Corralation between Washington Mutual and Franklin Growth
Assuming the 90 days horizon Washington Mutual is expected to generate 1.25 times less return on investment than Franklin Growth. But when comparing it to its historical volatility, Washington Mutual Investors is 1.74 times less risky than Franklin Growth. It trades about 0.11 of its potential returns per unit of risk. Franklin Growth Opportunities is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,262 in Franklin Growth Opportunities on August 27, 2024 and sell it today you would earn a total of 2,047 from holding Franklin Growth Opportunities or generate 48.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Mutual Investors vs. Franklin Growth Opportunities
Performance |
| Timeline |
| Washington Mutual |
| Franklin Growth Oppo |
Washington Mutual and Franklin Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and Franklin Growth
The main advantage of trading using opposite Washington Mutual and Franklin Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual 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.| Washington Mutual vs. John Hancock Government | Washington Mutual vs. Invesco Government Fund | Washington Mutual vs. Dunham Porategovernment Bond | Washington Mutual vs. Fidelity Series Government |
| Franklin Growth vs. Franklin Mutual Beacon | Franklin Growth vs. Templeton Developing Markets | Franklin Growth vs. Franklin Mutual Global | Franklin Growth vs. Franklin Mutual Global |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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