Correlation Between Western Asset and Franklin High
Can any of the company-specific risk be diversified away by investing in both Western Asset and Franklin High 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 Western Asset and Franklin High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Smash and Franklin High Income, you can compare the effects of market volatilities on Western Asset and Franklin High 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 Western Asset with a short position of Franklin High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Franklin High.
Diversification Opportunities for Western Asset and Franklin High
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Franklin is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Smash and Franklin High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin High Income and Western Asset 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 Western Asset Smash are associated (or correlated) with Franklin High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin High Income has no effect on the direction of Western Asset i.e., Western Asset and Franklin High go up and down completely randomly.
Pair Corralation between Western Asset and Franklin High
Assuming the 90 days horizon Western Asset Smash is expected to generate 0.99 times more return on investment than Franklin High. However, Western Asset Smash is 1.01 times less risky than Franklin High. It trades about 0.03 of its potential returns per unit of risk. Franklin High Income is currently generating about 0.0 per unit of risk. If you would invest 614.00 in Western Asset Smash on August 28, 2024 and sell it today you would earn a total of 1.00 from holding Western Asset Smash or generate 0.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Smash vs. Franklin High Income
Performance |
| Timeline |
| Western Asset Smash |
| Franklin High Income |
Western Asset and Franklin High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Franklin High
The main advantage of trading using opposite Western Asset and Franklin High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Franklin High 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 High will offset losses from the drop in Franklin High's long position.| Western Asset vs. Franklin Mutual Beacon | Western Asset vs. Templeton Developing Markets | Western Asset vs. Franklin Mutual Global | Western Asset vs. Franklin Mutual Global |
| Franklin High vs. Franklin Mutual Beacon | Franklin High vs. Templeton Developing Markets | Franklin High vs. Franklin Mutual Global | Franklin High vs. Franklin Mutual Global |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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