Correlation Between Franklin Equity and Calvert International

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

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

Diversification Opportunities for Franklin Equity and Calvert International

0.31

Correlation Coefficient

Franklin Equity  Calvert International

Weak diversification

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

Pair Corralation between Franklin Equity and Calvert International

Assuming the 90 days horizon Franklin Equity Income is expected to under-perform the Calvert International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin Equity Income is 1.12 times less risky than Calvert International. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Calvert International Opportunities is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,630  in Calvert International Opportunities on December 22, 2024 and sell it today you would earn a total of  60.00  from holding Calvert International Opportunities or generate 3.68% return on investment over 90 days.

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

Franklin Equity Income  vs.  Calvert International Opportun

Franklin Equity Income

Risk-Adjusted Performance

Very Weak

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

Calvert International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert International Opportunities are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Calvert International 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 Equity and Calvert International

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

The idea behind Franklin Equity Income and Calvert International Opportunities 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.