Correlation Between International Equity and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both International Equity 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 International Equity and Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Equity Series and Franklin Mutual Beacon, you can compare the effects of market volatilities on International Equity 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 International Equity with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Franklin Mutual.
Diversification Opportunities for International Equity and Franklin Mutual
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and Franklin is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Series and Franklin Mutual Beacon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Beacon and International Equity 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 International Equity Series 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 Beacon has no effect on the direction of International Equity i.e., International Equity and Franklin Mutual go up and down completely randomly.
Pair Corralation between International Equity and Franklin Mutual
Assuming the 90 days horizon International Equity Series is expected to generate 1.17 times more return on investment than Franklin Mutual. However, International Equity is 1.17 times more volatile than Franklin Mutual Beacon. It trades about 0.05 of its potential returns per unit of risk. Franklin Mutual Beacon is currently generating about 0.06 per unit of risk. If you would invest 1,094 in International Equity Series on September 12, 2024 and sell it today you would earn a total of 166.00 from holding International Equity Series or generate 15.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.7% |
| Values | Daily Returns |
International Equity Series vs. Franklin Mutual Beacon
Performance |
| Timeline |
| International Equity |
| Franklin Mutual Beacon |
International Equity and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Franklin Mutual
The main advantage of trading using opposite International Equity and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity 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.The idea behind International Equity Series and Franklin Mutual Beacon 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.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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