Correlation Between Franklin Mutual and Profunds Ultrashort

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

Diversification Opportunities for Franklin Mutual and Profunds Ultrashort

0.31

Correlation Coefficient

Franklin Mutual  Profunds Ultrashort

Weak diversification

The 3 months correlation between Franklin and Profunds is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and Profunds Ultrashort Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profunds Ultrashort 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 Profunds Ultrashort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profunds Ultrashort has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Profunds Ultrashort go up and down completely randomly.

Pair Corralation between Franklin Mutual and Profunds Ultrashort

Assuming the 90 days horizon Franklin Mutual Global is expected to under-perform the Profunds Ultrashort. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin Mutual Global is 1.2 times less risky than Profunds Ultrashort. The mutual fund trades about -0.32 of its potential returns per unit of risk. The Profunds Ultrashort Nasdaq 100 is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  2,523  in Profunds Ultrashort Nasdaq 100 on September 25, 2024 and sell it today you would lose (230.00) from holding Profunds Ultrashort Nasdaq 100 or give up 9.12% of portfolio value over 90 days.

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

Franklin Mutual Global  vs.  Profunds Ultrashort 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 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.

Profunds Ultrashort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Profunds Ultrashort Nasdaq 100 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 basic 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.

Pair Trading with Franklin Mutual and Profunds Ultrashort

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

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