Correlation Between Franklin Mutual and Invesco Nasdaq

Can any of the company-specific risk be diversified away by investing in both Franklin Mutual and Invesco Nasdaq 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 Invesco Nasdaq 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 Invesco Nasdaq 100, you can compare the effects of market volatilities on Franklin Mutual and Invesco Nasdaq 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 Invesco Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Invesco Nasdaq.

Diversification Opportunities for Franklin Mutual and Invesco Nasdaq

-0.33

Correlation Coefficient

Franklin Mutual  Invesco Nasdaq

Very good diversification

The 3 months correlation between Franklin and Invesco is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and Invesco Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Nasdaq 100 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 Invesco Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Nasdaq 100 has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Invesco Nasdaq go up and down completely randomly.

Pair Corralation between Franklin Mutual and Invesco Nasdaq

Assuming the 90 days horizon Franklin Mutual Global is expected to under-perform the Invesco Nasdaq. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin Mutual Global is 1.05 times less risky than Invesco Nasdaq. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Invesco Nasdaq 100 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,193  in Invesco Nasdaq 100 on October 20, 2024 and sell it today you would earn a total of  219.00  from holding Invesco Nasdaq 100 or generate 5.22% 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.  Invesco Nasdaq 100

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 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.

Invesco Nasdaq 100

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Nasdaq 100 are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Invesco Nasdaq 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 Invesco Nasdaq

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

The idea behind Franklin Mutual Global and Invesco Nasdaq 100 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.