Correlation Between Franklin and Westwood Largecap

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

By analyzing existing cross correlation between Franklin Government Money and Westwood Largecap Value, you can compare the effects of market volatilities on Franklin and Westwood Largecap 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 with a short position of Westwood Largecap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin and Westwood Largecap.

Diversification Opportunities for Franklin and Westwood Largecap

0.0

Correlation Coefficient

Franklin  Westwood Largecap

Pay attention - limited upside

The 3 months correlation between Franklin and Westwood is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Westwood Largecap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Largecap Value and Franklin 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 Government Money are associated (or correlated) with Westwood Largecap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Largecap Value has no effect on the direction of Franklin i.e., Franklin and Westwood Largecap go up and down completely randomly.

Pair Corralation between Franklin and Westwood Largecap

Assuming the 90 days horizon Franklin Government Money is expected to under-perform the Westwood Largecap. In addition to that, Franklin is 4.83 times more volatile than Westwood Largecap Value. It trades about -0.03 of its total potential returns per unit of risk. Westwood Largecap Value is currently generating about 0.03 per unit of volatility. If you would invest  1,234  in Westwood Largecap Value on October 10, 2024 and sell it today you would earn a total of  125.00  from holding Westwood Largecap Value or generate 10.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Franklin Government Money  vs.  Westwood Largecap Value

Franklin Government Money

Risk-Adjusted Performance

0 of 100

Very Weak

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

Westwood Largecap Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westwood Largecap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Franklin and Westwood Largecap

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

The idea behind Franklin Government Money and Westwood Largecap Value 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.