Correlation Between Washington Mutual and Franklin Income
Can any of the company-specific risk be diversified away by investing in both Washington Mutual and Franklin Income 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 Washington Mutual and Franklin Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Washington Mutual Investors and Franklin Income Fund, you can compare the effects of market volatilities on Washington Mutual and Franklin Income 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 Washington Mutual with a short position of Franklin Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and Franklin Income.
Diversification Opportunities for Washington Mutual and Franklin Income
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Washington and Franklin is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and Franklin Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Income and Washington 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 Washington Mutual Investors are associated (or correlated) with Franklin Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Income has no effect on the direction of Washington Mutual i.e., Washington Mutual and Franklin Income go up and down completely randomly.
Pair Corralation between Washington Mutual and Franklin Income
Assuming the 90 days horizon Washington Mutual Investors is expected to generate 2.36 times more return on investment than Franklin Income. However, Washington Mutual is 2.36 times more volatile than Franklin Income Fund. It trades about 0.06 of its potential returns per unit of risk. Franklin Income Fund is currently generating about 0.07 per unit of risk. If you would invest 5,037 in Washington Mutual Investors on September 14, 2024 and sell it today you would earn a total of 1,468 from holding Washington Mutual Investors or generate 29.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Washington Mutual Investors vs. Franklin Income Fund
Performance |
| Timeline |
| Washington Mutual |
| Franklin Income |
Washington Mutual and Franklin Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and Franklin Income
The main advantage of trading using opposite Washington Mutual and Franklin Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual position performs unexpectedly, Franklin Income 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 Income will offset losses from the drop in Franklin Income's long position.| Washington Mutual vs. Growth Fund Of | Washington Mutual vs. Europacific Growth Fund | Washington Mutual vs. Smallcap World Fund | Washington Mutual vs. Investment Of America |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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