Correlation Between Franklin Mutual and Schwab Target

Can any of the company-specific risk be diversified away by investing in both Franklin Mutual and Schwab Target 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 Schwab Target 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 Schwab Target 2065, you can compare the effects of market volatilities on Franklin Mutual and Schwab Target 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 Schwab Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Schwab Target.

Diversification Opportunities for Franklin Mutual and Schwab Target

0.82

Correlation Coefficient

Franklin Mutual  Schwab Target

Very poor diversification

The 3 months correlation between Franklin and Schwab is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and Schwab Target 2065 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Target 2065 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 Schwab Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Target 2065 has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Schwab Target go up and down completely randomly.

Pair Corralation between Franklin Mutual and Schwab Target

Assuming the 90 days horizon Franklin Mutual Global is expected to under-perform the Schwab Target. In addition to that, Franklin Mutual is 1.46 times more volatile than Schwab Target 2065. It trades about -0.06 of its total potential returns per unit of risk. Schwab Target 2065 is currently generating about -0.04 per unit of volatility. If you would invest  1,161  in Schwab Target 2065 on December 2, 2024 and sell it today you would lose (24.00) from holding Schwab Target 2065 or give up 2.07% of portfolio value over 90 days.

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

Franklin Mutual Global  vs.  Schwab Target 2065

Franklin Mutual Global

Risk-Adjusted Performance

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 fairly strong forward indicators, Franklin Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Schwab Target 2065

Risk-Adjusted Performance

Very Weak

Over the last 90 days Schwab Target 2065 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Schwab Target 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 Schwab Target

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

The idea behind Franklin Mutual Global and Schwab Target 2065 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.