Correlation Between Pgim Conservative and Franklin Mutual

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

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

Diversification Opportunities for Pgim Conservative and Franklin Mutual

0.75

Correlation Coefficient

Pgim Conservative  Franklin Mutual

Poor diversification

The 3 months correlation between Pgim and Franklin is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pgim Conservative Retirement and Franklin Mutual European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual European and Pgim Conservative 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 Pgim Conservative Retirement 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 European has no effect on the direction of Pgim Conservative i.e., Pgim Conservative and Franklin Mutual go up and down completely randomly.

Pair Corralation between Pgim Conservative and Franklin Mutual

Assuming the 90 days horizon Pgim Conservative is expected to generate 37.87 times less return on investment than Franklin Mutual. But when comparing it to its historical volatility, Pgim Conservative Retirement is 1.95 times less risky than Franklin Mutual. It trades about 0.01 of its potential returns per unit of risk. Franklin Mutual European is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,403  in Franklin Mutual European on December 2, 2024 and sell it today you would earn a total of  216.00  from holding Franklin Mutual European or generate 8.99% return on investment over 90 days.

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

Pgim Conservative Retirement  vs.  Franklin Mutual European

Pgim Conservative

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pgim Conservative Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Pgim Conservative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Mutual European

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Mutual European are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Franklin Mutual may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pgim Conservative and Franklin Mutual

The main advantage of trading using opposite Pgim Conservative and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pgim Conservative 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 Pgim Conservative Retirement and Franklin Mutual European 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.