Correlation Between Dunham Large and Franklin Mutual

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

By analyzing existing cross correlation between Dunham Large Cap and Franklin Mutual European, you can compare the effects of market volatilities on Dunham Large and Franklin Mutual 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 Dunham Large with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dunham Large and Franklin Mutual.

Diversification Opportunities for Dunham Large and Franklin Mutual

0.42

Correlation Coefficient

Dunham Large  Franklin Mutual

Very weak diversification

The 3 months correlation between Dunham and Franklin is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Large Cap and Franklin Mutual European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual European and Dunham Large 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 Dunham Large Cap are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual European has no effect on the direction of Dunham Large i.e., Dunham Large and Franklin Mutual go up and down completely randomly.

Pair Corralation between Dunham Large and Franklin Mutual

Assuming the 90 days horizon Dunham Large Cap is expected to under-perform the Franklin Mutual. In addition to that, Dunham Large is 2.0 times more volatile than Franklin Mutual European. It trades about -0.35 of its total potential returns per unit of risk. Franklin Mutual European is currently generating about -0.39 per unit of volatility. If you would invest  2,538  in Franklin Mutual European on October 4, 2024 and sell it today you would lose (134.00) from holding Franklin Mutual European or give up 5.28% of portfolio value over 90 days.

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

Dunham Large Cap  vs.  Franklin Mutual European

Dunham Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dunham Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Franklin Mutual European

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Mutual European has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Dunham Large and Franklin Mutual

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

The idea behind Dunham Large Cap and Franklin Mutual European 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.