Correlation Between Capital Group and Franklin Templeton

Can any of the company-specific risk be diversified away by investing in both Capital Group and Franklin Templeton 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 Capital Group and Franklin Templeton into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capital Group Dividend and Franklin Templeton ETF, you can compare the effects of market volatilities on Capital Group and Franklin Templeton 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 Capital Group with a short position of Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Group and Franklin Templeton.

Diversification Opportunities for Capital Group and Franklin Templeton

0.7

Correlation Coefficient

Capital Group  Franklin Templeton

Poor diversification

The 3 months correlation between Capital and Franklin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group Dividend and Franklin Templeton ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton ETF and Capital Group 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 Capital Group Dividend are associated (or correlated) with Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton ETF has no effect on the direction of Capital Group i.e., Capital Group and Franklin Templeton go up and down completely randomly.

Pair Corralation between Capital Group and Franklin Templeton

Given the investment horizon of 90 days Capital Group Dividend is expected to generate 1.11 times more return on investment than Franklin Templeton. However, Capital Group is 1.11 times more volatile than Franklin Templeton ETF. It trades about -0.14 of its potential returns per unit of risk. Franklin Templeton ETF is currently generating about -0.25 per unit of risk. If you would invest  3,050  in Capital Group Dividend on October 9, 2024 and sell it today you would lose (74.00) from holding Capital Group Dividend or give up 2.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Capital Group Dividend  vs.  Franklin Templeton ETF

Capital Group Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Group Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Capital Group is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Franklin Templeton ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Templeton ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Franklin Templeton is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Capital Group and Franklin Templeton

The main advantage of trading using opposite Capital Group and Franklin Templeton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Group position performs unexpectedly, Franklin Templeton 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 Templeton will offset losses from the drop in Franklin Templeton's long position.

The idea behind Capital Group Dividend and Franklin Templeton ETF 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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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.