Correlation Between Franklin Mutual and Franklin Equity
Can any of the company-specific risk be diversified away by investing in both Franklin Mutual and Franklin Equity 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 Franklin Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Mutual Beacon and Franklin Equity Income, you can compare the effects of market volatilities on Franklin Mutual and Franklin Equity 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 Franklin Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Franklin Equity.
Diversification Opportunities for Franklin Mutual and Franklin Equity
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Franklin is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Beacon and Franklin Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Equity Income 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 Beacon are associated (or correlated) with Franklin Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Equity Income has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Franklin Equity go up and down completely randomly.
Pair Corralation between Franklin Mutual and Franklin Equity
Assuming the 90 days horizon Franklin Mutual is expected to generate 1.43 times less return on investment than Franklin Equity. But when comparing it to its historical volatility, Franklin Mutual Beacon is 1.25 times less risky than Franklin Equity. It trades about 0.3 of its potential returns per unit of risk. Franklin Equity Income is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 3,424 in Franklin Equity Income on September 3, 2024 and sell it today you would earn a total of 178.00 from holding Franklin Equity Income or generate 5.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Mutual Beacon vs. Franklin Equity Income
Performance |
| Timeline |
| Franklin Mutual Beacon |
| Franklin Equity Income |
Franklin Mutual and Franklin Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Mutual and Franklin Equity
The main advantage of trading using opposite Franklin Mutual and Franklin Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Mutual position performs unexpectedly, Franklin Equity 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 Equity will offset losses from the drop in Franklin Equity's long position.| Franklin Mutual vs. Inverse Government Long | Franklin Mutual vs. Aig Government Money | Franklin Mutual vs. Dunham Porategovernment Bond | Franklin Mutual vs. Us Government Securities |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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