Correlation Between Mid-cap Value and Franklin Mutual

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

By analyzing existing cross correlation between Mid Cap Value Profund and Franklin Mutual Global, you can compare the effects of market volatilities on Mid-cap Value 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 Mid-cap Value with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid-cap Value and Franklin Mutual.

Diversification Opportunities for Mid-cap Value and Franklin Mutual

0.28

Correlation Coefficient

Mid-cap Value  Franklin Mutual

Modest diversification

The 3 months correlation between Mid-cap and Franklin is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value Profund and Franklin Mutual Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Global and Mid-cap Value 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 Mid Cap Value Profund 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 Global has no effect on the direction of Mid-cap Value i.e., Mid-cap Value and Franklin Mutual go up and down completely randomly.

Pair Corralation between Mid-cap Value and Franklin Mutual

Assuming the 90 days horizon Mid Cap Value Profund is expected to generate 1.63 times more return on investment than Franklin Mutual. However, Mid-cap Value is 1.63 times more volatile than Franklin Mutual Global. It trades about 0.21 of its potential returns per unit of risk. Franklin Mutual Global is currently generating about 0.06 per unit of risk. If you would invest  8,339  in Mid Cap Value Profund on September 11, 2024 and sell it today you would earn a total of  1,082  from holding Mid Cap Value Profund or generate 12.98% return on investment over 90 days.

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

Mid Cap Value Profund  vs.  Franklin Mutual Global

Mid Cap Value

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value Profund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mid-cap Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Franklin Mutual Global

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Mutual Global are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Mid-cap Value and Franklin Mutual

The main advantage of trading using opposite Mid-cap Value and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid-cap Value 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 Mid Cap Value Profund and Franklin Mutual Global 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.