Correlation Between Western Assets and Franklin Emerging
Can any of the company-specific risk be diversified away by investing in both Western Assets and Franklin Emerging 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 Assets and Franklin Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Assets Emerging and Franklin Emerging Market, you can compare the effects of market volatilities on Western Assets and Franklin Emerging 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 Assets with a short position of Franklin Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and Franklin Emerging.
Diversification Opportunities for Western Assets and Franklin Emerging
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Franklin is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and Franklin Emerging Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Emerging Market and Western Assets 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 Assets Emerging are associated (or correlated) with Franklin Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Emerging Market has no effect on the direction of Western Assets i.e., Western Assets and Franklin Emerging go up and down completely randomly.
Pair Corralation between Western Assets and Franklin Emerging
Assuming the 90 days horizon Western Assets is expected to generate 1.3 times less return on investment than Franklin Emerging. In addition to that, Western Assets is 1.46 times more volatile than Franklin Emerging Market. It trades about 0.1 of its total potential returns per unit of risk. Franklin Emerging Market is currently generating about 0.18 per unit of volatility. If you would invest 932.00 in Franklin Emerging Market on August 24, 2024 and sell it today you would earn a total of 281.00 from holding Franklin Emerging Market or generate 30.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Assets Emerging vs. Franklin Emerging Market
Performance |
| Timeline |
| Western Assets Emerging |
| Franklin Emerging Market |
Western Assets and Franklin Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Assets and Franklin Emerging
The main advantage of trading using opposite Western Assets and Franklin Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, Franklin Emerging 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 Emerging will offset losses from the drop in Franklin Emerging's long position.| Western Assets vs. Vanguard Total Stock | Western Assets vs. Vanguard 500 Index | Western Assets vs. Vanguard Total Stock | Western Assets vs. Vanguard Total Stock |
| Franklin Emerging vs. Nuveen Winslow Large Cap | Franklin Emerging vs. Siit Large Cap | Franklin Emerging vs. William Blair Large | Franklin Emerging vs. Massmutual Select T |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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