Correlation Between Franklin Mutual and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Franklin Mutual and Franklin Lifesmart 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 Lifesmart 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 Lifesmart Retirement, you can compare the effects of market volatilities on Franklin Mutual and Franklin Lifesmart 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 Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Franklin Lifesmart.
Diversification Opportunities for Franklin Mutual and Franklin Lifesmart
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Franklin is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Beacon and Franklin Lifesmart Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 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 Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Franklin Mutual and Franklin Lifesmart
Assuming the 90 days horizon Franklin Mutual Beacon is expected to generate 2.2 times more return on investment than Franklin Lifesmart. However, Franklin Mutual is 2.2 times more volatile than Franklin Lifesmart Retirement. It trades about 0.07 of its potential returns per unit of risk. Franklin Lifesmart Retirement is currently generating about 0.15 per unit of risk. If you would invest 1,635 in Franklin Mutual Beacon on August 29, 2024 and sell it today you would earn a total of 101.00 from holding Franklin Mutual Beacon or generate 6.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Mutual Beacon vs. Franklin Lifesmart Retirement
Performance |
| Timeline |
| Franklin Mutual Beacon |
| Franklin Lifesmart |
Franklin Mutual and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Mutual and Franklin Lifesmart
The main advantage of trading using opposite Franklin Mutual and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Mutual position performs unexpectedly, Franklin Lifesmart 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 Lifesmart will offset losses from the drop in Franklin Lifesmart's long position.The idea behind Franklin Mutual Beacon and Franklin Lifesmart Retirement pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Franklin Lifesmart vs. HUMANA INC | Franklin Lifesmart vs. Aquagold International | Franklin Lifesmart vs. Barloworld Ltd ADR | Franklin Lifesmart vs. Morningstar Unconstrained Allocation |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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