Correlation Between Western Asset and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Mortgage and Franklin Mutual Beacon, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Franklin Mutual.
Diversification Opportunities for Western Asset and Franklin Mutual
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Franklin is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage and Franklin Mutual Beacon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Beacon and Western Asset 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 Western Asset Mortgage 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 Beacon has no effect on the direction of Western Asset i.e., Western Asset and Franklin Mutual go up and down completely randomly.
Pair Corralation between Western Asset and Franklin Mutual
Assuming the 90 days horizon Western Asset is expected to generate 1.71 times less return on investment than Franklin Mutual. But when comparing it to its historical volatility, Western Asset Mortgage is 2.05 times less risky than Franklin Mutual. It trades about 0.1 of its potential returns per unit of risk. Franklin Mutual Beacon is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,623 in Franklin Mutual Beacon on September 5, 2024 and sell it today you would earn a total of 120.00 from holding Franklin Mutual Beacon or generate 7.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Western Asset Mortgage vs. Franklin Mutual Beacon
Performance |
| Timeline |
| Western Asset Mortgage |
| Franklin Mutual Beacon |
Western Asset and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Franklin Mutual
The main advantage of trading using opposite Western Asset and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. Franklin Mutual Beacon | Western Asset vs. Templeton Developing Markets | Western Asset vs. Franklin Mutual Global | Western Asset vs. Franklin Mutual Global |
| Franklin Mutual vs. Calvert High Yield | Franklin Mutual vs. Artisan High Income | Franklin Mutual vs. Lord Abbett High | Franklin Mutual vs. Pace High Yield |
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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