Correlation Between Franklin Mutual and Western Asset
Can any of the company-specific risk be diversified away by investing in both Franklin Mutual and Western Asset 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 Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Mutual Shares and Western Asset High, you can compare the effects of market volatilities on Franklin Mutual and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Western Asset.
Diversification Opportunities for Franklin Mutual and Western Asset
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Western is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Shares and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High 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 Shares are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Western Asset go up and down completely randomly.
Pair Corralation between Franklin Mutual and Western Asset
Assuming the 90 days horizon Franklin Mutual Shares is expected to generate 2.59 times more return on investment than Western Asset. However, Franklin Mutual is 2.59 times more volatile than Western Asset High. It trades about 0.05 of its potential returns per unit of risk. Western Asset High is currently generating about 0.1 per unit of risk. If you would invest 2,390 in Franklin Mutual Shares on September 2, 2024 and sell it today you would earn a total of 506.00 from holding Franklin Mutual Shares or generate 21.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Mutual Shares vs. Western Asset High
Performance |
| Timeline |
| Franklin Mutual Shares |
| Western Asset High |
Franklin Mutual and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Mutual and Western Asset
The main advantage of trading using opposite Franklin Mutual and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Mutual position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Franklin Mutual vs. Ab Small Cap | Franklin Mutual vs. Fisher Small Cap | Franklin Mutual vs. Vanguard Small Cap Growth | Franklin Mutual vs. Legg Mason Partners |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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