Correlation Between Franklin Adjustable and Baillie Gifford

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

By analyzing existing cross correlation between Franklin Adjustable Government and Baillie Gifford Eafe, you can compare the effects of market volatilities on Franklin Adjustable and Baillie Gifford 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 Adjustable with a short position of Baillie Gifford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Adjustable and Baillie Gifford.

Diversification Opportunities for Franklin Adjustable and Baillie Gifford

-0.1

Correlation Coefficient

Franklin Adjustable  Baillie Gifford

Good diversification

The 3 months correlation between Franklin and Baillie is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Adjustable Government and Baillie Gifford Eafe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Eafe and Franklin Adjustable 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 Adjustable Government are associated (or correlated) with Baillie Gifford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baillie Gifford Eafe has no effect on the direction of Franklin Adjustable i.e., Franklin Adjustable and Baillie Gifford go up and down completely randomly.

Pair Corralation between Franklin Adjustable and Baillie Gifford

Assuming the 90 days horizon Franklin Adjustable Government is expected to generate 0.09 times more return on investment than Baillie Gifford. However, Franklin Adjustable Government is 10.64 times less risky than Baillie Gifford. It trades about -0.1 of its potential returns per unit of risk. Baillie Gifford Eafe is currently generating about -0.33 per unit of risk. If you would invest  754.00  in Franklin Adjustable Government on October 10, 2024 and sell it today you would lose (1.00) from holding Franklin Adjustable Government or give up 0.13% of portfolio value over 90 days.

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

Franklin Adjustable Government  vs.  Baillie Gifford Eafe

Franklin Adjustable

Risk-Adjusted Performance

0 of 100

Very Weak

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

Baillie Gifford Eafe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baillie Gifford Eafe 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 Franklin Adjustable and Baillie Gifford

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

The idea behind Franklin Adjustable Government and Baillie Gifford Eafe 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.