Correlation Between Templeton Foreign and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Templeton Foreign 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 Templeton Foreign and Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Templeton Foreign Fund and Franklin Mutual European, you can compare the effects of market volatilities on Templeton Foreign 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 Templeton Foreign with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Foreign and Franklin Mutual.
Diversification Opportunities for Templeton Foreign and Franklin Mutual
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Templeton and Franklin is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Foreign Fund and Franklin Mutual European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual European and Templeton Foreign 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 Templeton Foreign Fund 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 European has no effect on the direction of Templeton Foreign i.e., Templeton Foreign and Franklin Mutual go up and down completely randomly.
Pair Corralation between Templeton Foreign and Franklin Mutual
Assuming the 90 days horizon Templeton Foreign Fund is expected to under-perform the Franklin Mutual. In addition to that, Templeton Foreign is 1.2 times more volatile than Franklin Mutual European. It trades about -0.18 of its total potential returns per unit of risk. Franklin Mutual European is currently generating about -0.16 per unit of volatility. If you would invest 2,632 in Franklin Mutual European on August 30, 2024 and sell it today you would lose (139.00) from holding Franklin Mutual European or give up 5.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Templeton Foreign Fund vs. Franklin Mutual European
Performance |
| Timeline |
| Templeton Foreign |
| Franklin Mutual European |
Templeton Foreign and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Templeton Foreign and Franklin Mutual
The main advantage of trading using opposite Templeton Foreign and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton Foreign 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.| Templeton Foreign vs. Victory High Income | Templeton Foreign vs. Ppm High Yield | Templeton Foreign vs. Morningstar Aggressive Growth | Templeton Foreign vs. Artisan High Income |
| Franklin Mutual vs. Ambrus Core Bond | Franklin Mutual vs. Vanguard Emerging Markets | Franklin Mutual vs. Transamerica Emerging Markets | Franklin Mutual vs. Astor Longshort Fund |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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