Correlation Between Franklin and Franklin Adjustable

Can any of the company-specific risk be diversified away by investing in both Franklin and Franklin Adjustable 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 and Franklin Adjustable 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 Franklin Adjustable Government, you can compare the effects of market volatilities on Franklin and Franklin Adjustable 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 with a short position of Franklin Adjustable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin and Franklin Adjustable.

Diversification Opportunities for Franklin and Franklin Adjustable

-0.03

Correlation Coefficient

Franklin  Franklin Adjustable

Good diversification

The 3 months correlation between Franklin and FRANKLIN is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Franklin Adjustable Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Adjustable and Franklin 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 Franklin Adjustable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Adjustable has no effect on the direction of Franklin i.e., Franklin and Franklin Adjustable go up and down completely randomly.

Pair Corralation between Franklin and Franklin Adjustable

Assuming the 90 days horizon Franklin Government Money is expected to generate 1.15 times more return on investment than Franklin Adjustable. However, Franklin is 1.15 times more volatile than Franklin Adjustable Government. It trades about 0.13 of its potential returns per unit of risk. Franklin Adjustable Government is currently generating about 0.02 per unit of risk. If you would invest  99.00  in Franklin Government Money on August 31, 2024 and sell it today you would earn a total of  1.00  from holding Franklin Government Money or generate 1.01% return on investment over 90 days.

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

Franklin Government Money  vs.  Franklin Adjustable Government

Franklin Government Money

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Government Money are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Adjustable

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Adjustable Government are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Adjustable 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 and Franklin Adjustable

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

The idea behind Franklin Government Money and Franklin Adjustable Government 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.