Correlation Between T Rowe and Franklin Strategic

Can any of the company-specific risk be diversified away by investing in both T Rowe and Franklin Strategic 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 T Rowe and Franklin Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between T Rowe Price and Franklin Strategic Income, you can compare the effects of market volatilities on T Rowe and Franklin Strategic 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 T Rowe with a short position of Franklin Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rowe and Franklin Strategic.

Diversification Opportunities for T Rowe and Franklin Strategic

-0.51

Correlation Coefficient

T Rowe  Franklin Strategic

Excellent diversification

The 3 months correlation between TRBCX and Franklin is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Franklin Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Strategic Income and T Rowe 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 T Rowe Price are associated (or correlated) with Franklin Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Strategic Income has no effect on the direction of T Rowe i.e., T Rowe and Franklin Strategic go up and down completely randomly.

Pair Corralation between T Rowe and Franklin Strategic

Assuming the 90 days horizon T Rowe Price is expected to generate 4.43 times more return on investment than Franklin Strategic. However, T Rowe is 4.43 times more volatile than Franklin Strategic Income. It trades about 0.14 of its potential returns per unit of risk. Franklin Strategic Income is currently generating about 0.07 per unit of risk. If you would invest  9,252  in T Rowe Price on September 28, 2024 and sell it today you would earn a total of  10,043  from holding T Rowe Price or generate 108.55% return on investment over 90 days.

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

T Rowe Price  vs.  Franklin Strategic Income

T Rowe Price

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, T Rowe may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Franklin Strategic Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Strategic Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with T Rowe and Franklin Strategic

The main advantage of trading using opposite T Rowe and Franklin Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe position performs unexpectedly, Franklin Strategic 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 Franklin Strategic will offset losses from the drop in Franklin Strategic's long position.

The idea behind T Rowe Price and Franklin Strategic Income 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.