Correlation Between Franklin Global and Mackenzie Developed

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

By analyzing existing cross correlation between Franklin Global Aggregate and Mackenzie Developed ex North, you can compare the effects of market volatilities on Franklin Global and Mackenzie Developed 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 Global with a short position of Mackenzie Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Global and Mackenzie Developed.

Diversification Opportunities for Franklin Global and Mackenzie Developed

0.63

Correlation Coefficient

Franklin Global  Mackenzie Developed

Poor diversification

The 3 months correlation between Franklin and Mackenzie is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Global Aggregate and Mackenzie Developed ex North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Developed and Franklin Global 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 Global Aggregate are associated (or correlated) with Mackenzie Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Developed has no effect on the direction of Franklin Global i.e., Franklin Global and Mackenzie Developed go up and down completely randomly.

Pair Corralation between Franklin Global and Mackenzie Developed

Assuming the 90 days trading horizon Franklin Global is expected to generate 5.63 times less return on investment than Mackenzie Developed. But when comparing it to its historical volatility, Franklin Global Aggregate is 1.16 times less risky than Mackenzie Developed. It trades about 0.01 of its potential returns per unit of risk. Mackenzie Developed ex North is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,904  in Mackenzie Developed ex North on September 3, 2024 and sell it today you would earn a total of  119.00  from holding Mackenzie Developed ex North or generate 1.34% return on investment over 90 days.

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

Franklin Global Aggregate  vs.  Mackenzie Developed ex North

Franklin Global Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Global Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Franklin Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Mackenzie Developed

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mackenzie Developed ex North are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Mackenzie Developed is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Franklin Global and Mackenzie Developed

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

The idea behind Franklin Global Aggregate and Mackenzie Developed ex North 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.