Correlation Between Franklin Real and Fixed Income

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

By analyzing existing cross correlation between Franklin Real Estate and Fixed Income Shares, you can compare the effects of market volatilities on Franklin Real and Fixed Income 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 Real with a short position of Fixed Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Real and Fixed Income.

Diversification Opportunities for Franklin Real and Fixed Income

0.44

Correlation Coefficient

Franklin Real  Fixed Income

Very weak diversification

The 3 months correlation between Franklin and Fixed is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Real Estate and Fixed Income Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fixed Income Shares and Franklin Real 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 Real Estate are associated (or correlated) with Fixed Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fixed Income Shares has no effect on the direction of Franklin Real i.e., Franklin Real and Fixed Income go up and down completely randomly.

Pair Corralation between Franklin Real and Fixed Income

Assuming the 90 days horizon Franklin Real Estate is expected to under-perform the Fixed Income. In addition to that, Franklin Real is 3.76 times more volatile than Fixed Income Shares. It trades about -0.12 of its total potential returns per unit of risk. Fixed Income Shares is currently generating about 0.06 per unit of volatility. If you would invest  898.00  in Fixed Income Shares on December 1, 2024 and sell it today you would earn a total of  12.00  from holding Fixed Income Shares or generate 1.34% return on investment over 90 days.

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

Franklin Real Estate  vs.  Fixed Income Shares

Franklin Real Estate

Risk-Adjusted Performance

Very Weak

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

Fixed Income Shares

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fixed Income Shares are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fixed Income 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 Real and Fixed Income

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

The idea behind Franklin Real Estate and Fixed Income Shares 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.