Correlation Between Franklin Government and American Funds
Can any of the company-specific risk be diversified away by investing in both Franklin Government and American Funds 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 Government and American Funds 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 American Funds Fundamental, you can compare the effects of market volatilities on Franklin Government and American Funds 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 Government with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Government and American Funds.
Diversification Opportunities for Franklin Government and American Funds
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Franklin and American is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and American Funds Fundamental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Funda and Franklin Government 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Funda has no effect on the direction of Franklin Government i.e., Franklin Government and American Funds go up and down completely randomly.
Pair Corralation between Franklin Government and American Funds
Assuming the 90 days horizon Franklin Government is expected to generate 5.43 times less return on investment than American Funds. But when comparing it to its historical volatility, Franklin Government Money is 7.69 times less risky than American Funds. It trades about 0.12 of its potential returns per unit of risk. American Funds Fundamental is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,590 in American Funds Fundamental on September 23, 2024 and sell it today you would earn a total of 2,535 from holding American Funds Fundamental or generate 45.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Franklin Government Money vs. American Funds Fundamental
Performance |
Timeline |
Franklin Government Money |
American Funds Funda |
Franklin Government and American Funds Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Franklin Government and American Funds
The main advantage of trading using opposite Franklin Government and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Government position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.Franklin Government vs. Origin Emerging Markets | Franklin Government vs. Pnc Emerging Markets | Franklin Government vs. Rbc Emerging Markets | Franklin Government vs. Investec Emerging Markets |
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Check out your portfolio center.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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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