Correlation Between Franklin Mutual and Rational Defensive

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

Diversification Opportunities for Franklin Mutual and Rational Defensive

-0.3

Correlation Coefficient

Franklin Mutual  Rational Defensive

Very good diversification

The 3 months correlation between Franklin and Rational is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and Rational Defensive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Defensive Growth 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 Rational Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Defensive Growth has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Rational Defensive go up and down completely randomly.

Pair Corralation between Franklin Mutual and Rational Defensive

Assuming the 90 days horizon Franklin Mutual is expected to generate 15.79 times less return on investment than Rational Defensive. But when comparing it to its historical volatility, Franklin Mutual Global is 1.26 times less risky than Rational Defensive. It trades about 0.01 of its potential returns per unit of risk. Rational Defensive Growth is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,436  in Rational Defensive Growth on October 4, 2024 and sell it today you would earn a total of  1,530  from holding Rational Defensive Growth or generate 62.81% return on investment over 90 days.

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

Franklin Mutual Global  vs.  Rational Defensive Growth

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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Rational Defensive Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Defensive Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Rational Defensive is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Mutual and Rational Defensive

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

The idea behind Franklin Mutual Global and Rational Defensive Growth 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.