Correlation Between Franklin Emerging and William Blair

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

By analyzing existing cross correlation between Franklin Emerging Market and William Blair Mid, you can compare the effects of market volatilities on Franklin Emerging and William Blair 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 Emerging with a short position of William Blair. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Emerging and William Blair.

Diversification Opportunities for Franklin Emerging and William Blair

0.56

Correlation Coefficient

Franklin Emerging  William Blair

Very weak diversification

The 3 months correlation between Franklin and William is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Emerging Market and William Blair Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on William Blair Mid and Franklin Emerging 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 Emerging Market are associated (or correlated) with William Blair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of William Blair Mid has no effect on the direction of Franklin Emerging i.e., Franklin Emerging and William Blair go up and down completely randomly.

Pair Corralation between Franklin Emerging and William Blair

Assuming the 90 days horizon Franklin Emerging Market is expected to under-perform the William Blair. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin Emerging Market is 1.35 times less risky than William Blair. The mutual fund trades about -0.1 of its potential returns per unit of risk. The William Blair Mid is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,132  in William Blair Mid on October 11, 2024 and sell it today you would lose (5.00) from holding William Blair Mid or give up 0.44% of portfolio value over 90 days.

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

Franklin Emerging Market  vs.  William Blair Mid

Franklin Emerging Market

Risk-Adjusted Performance

0 of 100

Very Weak

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

William Blair Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days William Blair Mid has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, William Blair 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 Emerging and William Blair

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

The idea behind Franklin Emerging Market and William Blair Mid 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.