Correlation Between Franklin California and Deutsche Multi

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

By analyzing existing cross correlation between Franklin California Intermediate Term and Deutsche Multi Asset Moderate, you can compare the effects of market volatilities on Franklin California and Deutsche Multi 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 California with a short position of Deutsche Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin California and Deutsche Multi.

Diversification Opportunities for Franklin California and Deutsche Multi

0.55

Correlation Coefficient

Franklin California  Deutsche Multi

Very weak diversification

The 3 months correlation between Franklin and Deutsche is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Franklin California Intermedia and Deutsche Multi Asset Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Multi Asset and Franklin California 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 California Intermediate Term are associated (or correlated) with Deutsche Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Multi Asset has no effect on the direction of Franklin California i.e., Franklin California and Deutsche Multi go up and down completely randomly.

Pair Corralation between Franklin California and Deutsche Multi

Assuming the 90 days horizon Franklin California Intermediate Term is expected to under-perform the Deutsche Multi. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin California Intermediate Term is 2.32 times less risky than Deutsche Multi. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Deutsche Multi Asset Moderate is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,020  in Deutsche Multi Asset Moderate on September 14, 2024 and sell it today you would earn a total of  8.00  from holding Deutsche Multi Asset Moderate or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Franklin California Intermedia  vs.  Deutsche Multi Asset Moderate

Franklin California

Risk-Adjusted Performance

0 of 100

Very Weak

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

Deutsche Multi Asset

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Multi Asset Moderate are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Deutsche Multi 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 California and Deutsche Multi

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

The idea behind Franklin California Intermediate Term and Deutsche Multi Asset Moderate 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.