Correlation Between Franklin Mutual and American Mutual

Can any of the company-specific risk be diversified away by investing in both Franklin Mutual and American 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 Franklin Mutual and American Mutual 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 American Mutual Fund, you can compare the effects of market volatilities on Franklin Mutual and American 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 Franklin Mutual with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and American Mutual.

Diversification Opportunities for Franklin Mutual and American Mutual

0.8

Correlation Coefficient

Franklin Mutual  American Mutual

Very poor diversification

The 3 months correlation between Franklin and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual 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 American Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Mutual has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and American Mutual go up and down completely randomly.

Pair Corralation between Franklin Mutual and American Mutual

Assuming the 90 days horizon Franklin Mutual is expected to generate 2.74 times less return on investment than American Mutual. In addition to that, Franklin Mutual is 1.31 times more volatile than American Mutual Fund. It trades about 0.02 of its total potential returns per unit of risk. American Mutual Fund is currently generating about 0.07 per unit of volatility. If you would invest  4,580  in American Mutual Fund on September 26, 2024 and sell it today you would earn a total of  1,021  from holding American Mutual Fund or generate 22.29% return on investment over 90 days.

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

Franklin Mutual Global  vs.  American Mutual Fund

Franklin Mutual Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Mutual Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

American Mutual

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Mutual Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, American 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 Franklin Mutual and American Mutual

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

The idea behind Franklin Mutual Global and American Mutual 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .