Correlation Between Vanguard Financials and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Vanguard Financials 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 Vanguard Financials and Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Financials Index and Franklin Mutual Global, you can compare the effects of market volatilities on Vanguard Financials 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 Vanguard Financials with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Financials and Franklin Mutual.
Diversification Opportunities for Vanguard Financials and Franklin Mutual
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vanguard and Franklin is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and Franklin Mutual Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Global and Vanguard Financials 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 Vanguard Financials Index 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 Global has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and Franklin Mutual go up and down completely randomly.
Pair Corralation between Vanguard Financials and Franklin Mutual
Assuming the 90 days horizon Vanguard Financials Index is expected to generate 2.69 times more return on investment than Franklin Mutual. However, Vanguard Financials is 2.69 times more volatile than Franklin Mutual Global. It trades about 0.26 of its potential returns per unit of risk. Franklin Mutual Global is currently generating about 0.07 per unit of risk. If you would invest 5,756 in Vanguard Financials Index on August 28, 2024 and sell it today you would earn a total of 546.00 from holding Vanguard Financials Index or generate 9.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Financials Index vs. Franklin Mutual Global
Performance |
| Timeline |
| Vanguard Financials Index |
| Franklin Mutual Global |
Vanguard Financials and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Financials and Franklin Mutual
The main advantage of trading using opposite Vanguard Financials and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Financials 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 Vanguard Financials Index and Franklin Mutual Global 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.
| Franklin Mutual vs. Vanguard Financials Index | Franklin Mutual vs. Royce Global Financial | Franklin Mutual vs. Goldman Sachs Financial | Franklin Mutual vs. Gabelli Global Financial |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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