Correlation Between Franklin Mutual and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Franklin Mutual and Franklin Federal 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 Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Mutual Global and Franklin Federal Tax Free, you can compare the effects of market volatilities on Franklin Mutual and Franklin Federal 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 Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Franklin Federal.
Diversification Opportunities for Franklin Mutual and Franklin Federal
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Franklin is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and Franklin Federal Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Federal Tax 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 Global are associated (or correlated) with Franklin Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Federal Tax has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Franklin Federal go up and down completely randomly.
Pair Corralation between Franklin Mutual and Franklin Federal
Assuming the 90 days horizon Franklin Mutual Global is expected to generate 2.86 times more return on investment than Franklin Federal. However, Franklin Mutual is 2.86 times more volatile than Franklin Federal Tax Free. It trades about 0.06 of its potential returns per unit of risk. Franklin Federal Tax Free is currently generating about 0.08 per unit of risk. If you would invest 2,572 in Franklin Mutual Global on September 12, 2024 and sell it today you would earn a total of 600.00 from holding Franklin Mutual Global or generate 23.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Mutual Global vs. Franklin Federal Tax Free
Performance |
| Timeline |
| Franklin Mutual Global |
| Franklin Federal Tax |
Franklin Mutual and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Mutual and Franklin Federal
The main advantage of trading using opposite Franklin Mutual and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Mutual position performs unexpectedly, Franklin Federal 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 Federal will offset losses from the drop in Franklin Federal's long position.| Franklin Mutual vs. Qs Large Cap | Franklin Mutual vs. American Mutual Fund | Franklin Mutual vs. Virtus Nfj Large Cap | Franklin Mutual vs. Avantis Large Cap |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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