Correlation Between Franklin Federal and Mfs Emerging

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

Diversification Opportunities for Franklin Federal and Mfs Emerging

FranklinMfsDiversified AwayFranklinMfsDiversified Away100%
0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Franklin and Mfs is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Limited Term and Mfs Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Emerging Markets and Franklin Federal 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 Federal Limited Term are associated (or correlated) with Mfs Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Emerging Markets has no effect on the direction of Franklin Federal i.e., Franklin Federal and Mfs Emerging go up and down completely randomly.

Pair Corralation between Franklin Federal and Mfs Emerging

Assuming the 90 days horizon Franklin Federal Limited Term is expected to generate 0.45 times more return on investment than Mfs Emerging. However, Franklin Federal Limited Term is 2.23 times less risky than Mfs Emerging. It trades about 0.03 of its potential returns per unit of risk. Mfs Emerging Markets is currently generating about -0.05 per unit of risk. If you would invest  1,029  in Franklin Federal Limited Term on September 16, 2024 and sell it today you would earn a total of  2.00  from holding Franklin Federal Limited Term or generate 0.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Franklin Federal Limited Term  vs.  Mfs Emerging Markets

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -1.0-0.50.00.51.01.5
JavaScript chart by amCharts 3.21.15FTFZX MEDCX
       Timeline  
Franklin Federal Lim 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Federal Limited Term are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Federal 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 3.21.15OctNovDecNovDec10.2610.2810.310.3210.34
Mfs Emerging Markets 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Mfs Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Mfs Emerging 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 3.21.15OctNovDecNovDec12.112.1512.212.2512.312.35

Franklin Federal and Mfs Emerging Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.23-0.0905-0.0618-0.033-0.004310.02440.05320.08190.170.37 5101520253035
JavaScript chart by amCharts 3.21.15FTFZX MEDCX
       Returns  

Pair Trading with Franklin Federal and Mfs Emerging

The main advantage of trading using opposite Franklin Federal and Mfs Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Mfs Emerging 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 Mfs Emerging will offset losses from the drop in Mfs Emerging's long position.
The idea behind Franklin Federal Limited Term and Mfs Emerging Markets 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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