Correlation Between Transamerica Emerging and Franklin International
Can any of the company-specific risk be diversified away by investing in both Transamerica Emerging 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 Transamerica Emerging and Franklin International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transamerica Emerging Markets and Franklin International Core, you can compare the effects of market volatilities on Transamerica Emerging 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 Transamerica Emerging with a short position of Franklin International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Emerging and Franklin International.
Diversification Opportunities for Transamerica Emerging and Franklin International
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Transamerica and Franklin is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Emerging Markets and Franklin International Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin International and Transamerica Emerging 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 Transamerica Emerging Markets 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 Transamerica Emerging i.e., Transamerica Emerging and Franklin International go up and down completely randomly.
Pair Corralation between Transamerica Emerging and Franklin International
Assuming the 90 days horizon Transamerica Emerging is expected to generate 2.26 times less return on investment than Franklin International. In addition to that, Transamerica Emerging is 1.13 times more volatile than Franklin International Core. It trades about 0.03 of its total potential returns per unit of risk. Franklin International Core is currently generating about 0.07 per unit of volatility. If you would invest 933.00 in Franklin International Core on September 5, 2024 and sell it today you would earn a total of 283.00 from holding Franklin International Core or generate 30.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Transamerica Emerging Markets vs. Franklin International Core
Performance |
| Timeline |
| Transamerica Emerging |
| Franklin International |
Transamerica Emerging and Franklin International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transamerica Emerging and Franklin International
The main advantage of trading using opposite Transamerica Emerging and Franklin International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica Emerging 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 Transamerica Emerging Markets and Franklin International Core 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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