Correlation Between Franklin Fund and Tax Managed

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

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

Diversification Opportunities for Franklin Fund and Tax Managed

-0.25

Correlation Coefficient

Franklin Fund  Tax Managed

Very good diversification

The 3 months correlation between Franklin and Tax is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Fund Allocator and Tax Managed Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Managed Large and Franklin Fund 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 Franklin Fund Allocator are associated (or correlated) with Tax Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Managed Large has no effect on the direction of Franklin Fund i.e., Franklin Fund and Tax Managed go up and down completely randomly.

Pair Corralation between Franklin Fund and Tax Managed

Assuming the 90 days horizon Franklin Fund Allocator is expected to generate 1.0 times more return on investment than Tax Managed. However, Franklin Fund Allocator is 1.0 times less risky than Tax Managed. It trades about 0.08 of its potential returns per unit of risk. Tax Managed Large Cap is currently generating about -0.1 per unit of risk. If you would invest  1,029  in Franklin Fund Allocator on December 24, 2024 and sell it today you would earn a total of  44.00  from holding Franklin Fund Allocator or generate 4.28% return on investment over 90 days.

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

Franklin Fund Allocator  vs.  Tax Managed Large Cap

Franklin Fund Allocator

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Fund Allocator are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Franklin Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tax Managed Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tax Managed Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Tax Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Fund and Tax Managed

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

The idea behind Franklin Fund Allocator and Tax Managed Large Cap 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.