Correlation Between Rbc Emerging and Franklin Mutual

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

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

Diversification Opportunities for Rbc Emerging and Franklin Mutual

-0.43

Correlation Coefficient

Rbc Emerging  Franklin Mutual

Very good diversification

The 3 months correlation between Rbc and Franklin is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Emerging Markets and Franklin Mutual Beacon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Beacon and Rbc Emerging 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 Rbc Emerging Markets 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 Beacon has no effect on the direction of Rbc Emerging i.e., Rbc Emerging and Franklin Mutual go up and down completely randomly.

Pair Corralation between Rbc Emerging and Franklin Mutual

Assuming the 90 days horizon Rbc Emerging Markets is expected to under-perform the Franklin Mutual. In addition to that, Rbc Emerging is 1.54 times more volatile than Franklin Mutual Beacon. It trades about -0.16 of its total potential returns per unit of risk. Franklin Mutual Beacon is currently generating about -0.02 per unit of volatility. If you would invest  1,700  in Franklin Mutual Beacon on September 19, 2024 and sell it today you would lose (9.00) from holding Franklin Mutual Beacon or give up 0.53% of portfolio value over 90 days.

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

Rbc Emerging Markets  vs.  Franklin Mutual Beacon

Rbc Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

Franklin Mutual Beacon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Mutual Beacon has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward 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 Rbc Emerging and Franklin Mutual

The main advantage of trading using opposite Rbc Emerging and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rbc Emerging 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 Rbc Emerging Markets and Franklin Mutual Beacon 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.