Correlation Between Franklin Mutual and Transamerica Asset

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

By analyzing existing cross correlation between Franklin Mutual Shares and Transamerica Asset Allocation, you can compare the effects of market volatilities on Franklin Mutual and Transamerica Asset 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 Transamerica Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Transamerica Asset.

Diversification Opportunities for Franklin Mutual and Transamerica Asset

0.81

Correlation Coefficient

Franklin Mutual  Transamerica Asset

Very poor diversification

The 3 months correlation between Franklin and Transamerica is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Shares and Transamerica Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Asset 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 Shares are associated (or correlated) with Transamerica Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Asset has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Transamerica Asset go up and down completely randomly.

Pair Corralation between Franklin Mutual and Transamerica Asset

Assuming the 90 days horizon Franklin Mutual is expected to generate 1.31 times less return on investment than Transamerica Asset. In addition to that, Franklin Mutual is 1.1 times more volatile than Transamerica Asset Allocation. It trades about 0.1 of its total potential returns per unit of risk. Transamerica Asset Allocation is currently generating about 0.15 per unit of volatility. If you would invest  1,460  in Transamerica Asset Allocation on September 12, 2024 and sell it today you would earn a total of  87.00  from holding Transamerica Asset Allocation or generate 5.96% return on investment over 90 days.

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

Franklin Mutual Shares  vs.  Transamerica Asset Allocation

Franklin Mutual Shares

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Mutual Shares are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Franklin Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transamerica Asset

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Asset Allocation are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Transamerica Asset 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 Mutual and Transamerica Asset

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

The idea behind Franklin Mutual Shares and Transamerica Asset Allocation 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.