Correlation Between Franklin Moderate and Aig Government

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Can any of the company-specific risk be diversified away by investing in both Franklin Moderate and Aig Government 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 Moderate and Aig Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Moderate Allocation and Aig Government Money, you can compare the effects of market volatilities on Franklin Moderate and Aig Government 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 Moderate with a short position of Aig Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Moderate and Aig Government.

Diversification Opportunities for Franklin Moderate and Aig Government

FranklinAigDiversified AwayFranklinAigDiversified Away100%
0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Franklin and Aig is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Moderate Allocation and Aig Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aig Government Money and Franklin Moderate 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 Moderate Allocation are associated (or correlated) with Aig Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aig Government Money has no effect on the direction of Franklin Moderate i.e., Franklin Moderate and Aig Government go up and down completely randomly.

Pair Corralation between Franklin Moderate and Aig Government

Assuming the 90 days horizon Franklin Moderate Allocation is expected to under-perform the Aig Government. In addition to that, Franklin Moderate is 2.2 times more volatile than Aig Government Money. It trades about -0.1 of its total potential returns per unit of risk. Aig Government Money is currently generating about -0.06 per unit of volatility. If you would invest  1,012  in Aig Government Money on October 14, 2024 and sell it today you would lose (9.00) from holding Aig Government Money or give up 0.89% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Franklin Moderate Allocation  vs.  Aig Government Money

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -1012345
JavaScript chart by amCharts 3.21.15FMTZX SMAAX
       Timeline  
Franklin Moderate 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Franklin Moderate Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan15.715.815.91616.116.216.316.4
Aig Government Money 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aig Government Money has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aig Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1010.0510.110.15

Franklin Moderate and Aig Government Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.84-0.6-0.36-0.12-0.02540.04940.180.420.660.9 1234567
JavaScript chart by amCharts 3.21.15FMTZX SMAAX
       Returns  

Pair Trading with Franklin Moderate and Aig Government

The main advantage of trading using opposite Franklin Moderate and Aig Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Moderate position performs unexpectedly, Aig Government 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 Aig Government will offset losses from the drop in Aig Government's long position.
The idea behind Franklin Moderate Allocation and Aig Government Money 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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