Correlation Between Franklin Mutual and Franklin International
Can any of the company-specific risk be diversified away by investing in both Franklin Mutual and Franklin International 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 International 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 International Growth, you can compare the effects of market volatilities on Franklin Mutual and Franklin International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Franklin International.
Diversification Opportunities for Franklin Mutual and Franklin International
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Franklin is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and Franklin International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin International has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Franklin International go up and down completely randomly.
Pair Corralation between Franklin Mutual and Franklin International
Assuming the 90 days horizon Franklin Mutual is expected to generate 1.71 times less return on investment than Franklin International. But when comparing it to its historical volatility, Franklin Mutual Global is 1.38 times less risky than Franklin International. It trades about 0.06 of its potential returns per unit of risk. Franklin International Growth is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,385 in Franklin International Growth on August 29, 2024 and sell it today you would earn a total of 347.00 from holding Franklin International Growth or generate 25.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Mutual Global vs. Franklin International Growth
Performance |
| Timeline |
| Franklin Mutual Global |
| Franklin International |
Franklin Mutual and Franklin International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Mutual and Franklin International
The main advantage of trading using opposite Franklin Mutual and Franklin International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Mutual position performs unexpectedly, Franklin International 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 International will offset losses from the drop in Franklin International's long position.The idea behind Franklin Mutual Global and Franklin International Growth 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.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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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