Correlation Between Franklin Dynatech and Mfs Growth

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

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

Diversification Opportunities for Franklin Dynatech and Mfs Growth

0.99

Correlation Coefficient

Franklin Dynatech  Mfs Growth

No risk reduction

The 3 months correlation between Franklin and Mfs is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Dynatech Fund and Mfs Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Growth Fund and Franklin Dynatech 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 Dynatech Fund are associated (or correlated) with Mfs Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Growth Fund has no effect on the direction of Franklin Dynatech i.e., Franklin Dynatech and Mfs Growth go up and down completely randomly.

Pair Corralation between Franklin Dynatech and Mfs Growth

Assuming the 90 days horizon Franklin Dynatech Fund is expected to generate 1.3 times more return on investment than Mfs Growth. However, Franklin Dynatech is 1.3 times more volatile than Mfs Growth Fund. It trades about 0.18 of its potential returns per unit of risk. Mfs Growth Fund is currently generating about 0.18 per unit of risk. If you would invest  16,608  in Franklin Dynatech Fund on September 3, 2024 and sell it today you would earn a total of  2,293  from holding Franklin Dynatech Fund or generate 13.81% return on investment over 90 days.

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

Franklin Dynatech Fund  vs.  Mfs Growth Fund

Franklin Dynatech

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Dynatech Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Franklin Dynatech showed solid returns over the last few months and may actually be approaching a breakup point.

Mfs Growth Fund

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Growth Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Mfs Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Franklin Dynatech and Mfs Growth

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

The idea behind Franklin Dynatech Fund and Mfs Growth 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.