Correlation Between Franklin Mutual and Barings Emerging

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

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

Diversification Opportunities for Franklin Mutual and Barings Emerging

0.27

Correlation Coefficient

Franklin Mutual  Barings Emerging

Modest diversification

The 3 months correlation between Franklin and Barings is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Beacon and Barings Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings Emerging Markets and Franklin Mutual 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 Mutual Beacon are associated (or correlated) with Barings Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings Emerging Markets has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Barings Emerging go up and down completely randomly.

Pair Corralation between Franklin Mutual and Barings Emerging

Assuming the 90 days horizon Franklin Mutual Beacon is expected to generate 2.12 times more return on investment than Barings Emerging. However, Franklin Mutual is 2.12 times more volatile than Barings Emerging Markets. It trades about 0.01 of its potential returns per unit of risk. Barings Emerging Markets is currently generating about 0.02 per unit of risk. If you would invest  1,539  in Franklin Mutual Beacon on September 25, 2024 and sell it today you would earn a total of  27.00  from holding Franklin Mutual Beacon or generate 1.75% return on investment over 90 days.

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

Franklin Mutual Beacon  vs.  Barings Emerging Markets

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 latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Barings Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Franklin Mutual and Barings Emerging

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

The idea behind Franklin Mutual Beacon and Barings 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.