Correlation Between Capital Group and Franklin International

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

By analyzing existing cross correlation between Capital Group New and Franklin International Core, you can compare the effects of market volatilities on Capital Group and Franklin International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Group and Franklin International.

Diversification Opportunities for Capital Group and Franklin International

0.89

Correlation Coefficient

Capital Group  Franklin International

Very poor diversification

The 3 months correlation between Capital and Franklin is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group New and Franklin International Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin International 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 New are associated (or correlated) with Franklin International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin International has no effect on the direction of Capital Group i.e., Capital Group and Franklin International go up and down completely randomly.

Pair Corralation between Capital Group and Franklin International

Given the investment horizon of 90 days Capital Group is expected to generate 2.91 times less return on investment than Franklin International. In addition to that, Capital Group is 1.04 times more volatile than Franklin International Core. It trades about 0.05 of its total potential returns per unit of risk. Franklin International Core is currently generating about 0.14 per unit of volatility. If you would invest  3,082  in Franklin International Core on November 28, 2024 and sell it today you would earn a total of  193.00  from holding Franklin International Core or generate 6.26% return on investment over 90 days.

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

Capital Group New  vs.  Franklin International Core

Capital Group New

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group New are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Capital Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Franklin International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin International Core are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Franklin International may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Capital Group and Franklin International

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

The idea behind Capital Group New and Franklin International Core 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.