Correlation Between Franklin Mutual and Vanguard Information

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

By analyzing existing cross correlation between Franklin Mutual European and Vanguard Information Technology, you can compare the effects of market volatilities on Franklin Mutual and Vanguard Information 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 Mutual with a short position of Vanguard Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Vanguard Information.

Diversification Opportunities for Franklin Mutual and Vanguard Information

-0.31

Correlation Coefficient

Franklin Mutual  Vanguard Information

Very good diversification

The 3 months correlation between Franklin and Vanguard is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual European and Vanguard Information Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Information and Franklin Mutual 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 Mutual European are associated (or correlated) with Vanguard Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Information has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Vanguard Information go up and down completely randomly.

Pair Corralation between Franklin Mutual and Vanguard Information

Assuming the 90 days horizon Franklin Mutual European is expected to generate 0.53 times more return on investment than Vanguard Information. However, Franklin Mutual European is 1.89 times less risky than Vanguard Information. It trades about 0.31 of its potential returns per unit of risk. Vanguard Information Technology is currently generating about 0.01 per unit of risk. If you would invest  2,407  in Franklin Mutual European on October 25, 2024 and sell it today you would earn a total of  100.00  from holding Franklin Mutual European or generate 4.15% return on investment over 90 days.

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

Franklin Mutual European  vs.  Vanguard Information Technolog

Franklin Mutual European

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Information

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Information Technology are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Information may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Franklin Mutual and Vanguard Information

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

The idea behind Franklin Mutual European and Vanguard Information Technology 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 Global Correlations module to find global opportunities by holding instruments from different markets.