Correlation Between Invesco Energy and Franklin Mutual

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

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

Diversification Opportunities for Invesco Energy and Franklin Mutual

0.79

Correlation Coefficient

Invesco Energy  Franklin Mutual

Poor diversification

The 3 months correlation between Invesco and Franklin is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Energy Fund and Franklin Mutual Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Shares and Invesco Energy 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 Invesco Energy Fund are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Shares has no effect on the direction of Invesco Energy i.e., Invesco Energy and Franklin Mutual go up and down completely randomly.

Pair Corralation between Invesco Energy and Franklin Mutual

Assuming the 90 days horizon Invesco Energy is expected to generate 1.36 times less return on investment than Franklin Mutual. In addition to that, Invesco Energy is 1.46 times more volatile than Franklin Mutual Shares. It trades about 0.04 of its total potential returns per unit of risk. Franklin Mutual Shares is currently generating about 0.08 per unit of volatility. If you would invest  2,468  in Franklin Mutual Shares on September 12, 2024 and sell it today you would earn a total of  364.00  from holding Franklin Mutual Shares or generate 14.75% return on investment over 90 days.

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

Invesco Energy Fund  vs.  Franklin Mutual Shares

Invesco Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Energy Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Invesco Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Franklin Mutual Shares

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Mutual Shares are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Franklin Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco Energy and Franklin Mutual

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

The idea behind Invesco Energy Fund and Franklin Mutual 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.