Correlation Between Franklin Mutual and Aama Income

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

By analyzing existing cross correlation between Franklin Mutual Global and Aama Income Fund, you can compare the effects of market volatilities on Franklin Mutual and Aama Income 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 Aama Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Aama Income.

Diversification Opportunities for Franklin Mutual and Aama Income

0.92

Correlation Coefficient

Franklin Mutual  Aama Income

Almost no diversification

The 3 months correlation between Franklin and Aama is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and Aama Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aama Income Fund 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 Global are associated (or correlated) with Aama Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aama Income Fund has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Aama Income go up and down completely randomly.

Pair Corralation between Franklin Mutual and Aama Income

Assuming the 90 days horizon Franklin Mutual Global is expected to generate 15.3 times more return on investment than Aama Income. However, Franklin Mutual is 15.3 times more volatile than Aama Income Fund. It trades about 0.22 of its potential returns per unit of risk. Aama Income Fund is currently generating about 0.39 per unit of risk. If you would invest  2,770  in Franklin Mutual Global on December 29, 2024 and sell it today you would earn a total of  251.00  from holding Franklin Mutual Global or generate 9.06% return on investment over 90 days.

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

Franklin Mutual Global  vs.  Aama Income Fund

Franklin Mutual Global

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Mutual Global are ranked lower than 17 (%) 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.

Aama Income Fund

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Aama Income Fund are ranked lower than 31 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Aama Income 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 Aama Income

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

The idea behind Franklin Mutual Global and Aama Income Fund 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.