Correlation Between Franklin Adjustable and Income Stock

Can any of the company-specific risk be diversified away by investing in both Franklin Adjustable and Income Stock 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 Income Stock 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 Income Stock Fund, you can compare the effects of market volatilities on Franklin Adjustable and Income Stock 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 Income Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Adjustable and Income Stock.

Diversification Opportunities for Franklin Adjustable and Income Stock

-0.48

Correlation Coefficient

Franklin Adjustable  Income Stock

Very good diversification

The 3 months correlation between Franklin and Income is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Adjustable Government and Income Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Stock 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 Income Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Stock has no effect on the direction of Franklin Adjustable i.e., Franklin Adjustable and Income Stock go up and down completely randomly.

Pair Corralation between Franklin Adjustable and Income Stock

Assuming the 90 days horizon Franklin Adjustable Government is expected to generate 0.06 times more return on investment than Income Stock. However, Franklin Adjustable Government is 17.59 times less risky than Income Stock. It trades about 0.16 of its potential returns per unit of risk. Income Stock Fund is currently generating about -0.09 per unit of risk. If you would invest  745.00  in Franklin Adjustable Government on October 26, 2024 and sell it today you would earn a total of  8.00  from holding Franklin Adjustable Government or generate 1.07% return on investment over 90 days.

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

Franklin Adjustable Government  vs.  Income Stock Fund

Franklin Adjustable

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Adjustable Government are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. 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.

Income Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Income Stock Fund 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 Income Stock

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

The idea behind Franklin Adjustable Government and Income Stock Fund 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..