Correlation Between Visa and Franklin Growth

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

By analyzing existing cross correlation between Visa Class A and Franklin Growth Allocation, you can compare the effects of market volatilities on Visa and Franklin Growth 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 Visa with a short position of Franklin Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Franklin Growth.

Diversification Opportunities for Visa and Franklin Growth

0.36

Correlation Coefficient

Visa  Franklin Growth

Weak diversification

The 3 months correlation between Visa and Franklin is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Franklin Growth Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Growth Allo and Visa 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 Visa Class A are associated (or correlated) with Franklin Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Growth Allo has no effect on the direction of Visa i.e., Visa and Franklin Growth go up and down completely randomly.

Pair Corralation between Visa and Franklin Growth

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.4 times more return on investment than Franklin Growth. However, Visa is 1.4 times more volatile than Franklin Growth Allocation. It trades about -0.11 of its potential returns per unit of risk. Franklin Growth Allocation is currently generating about -0.24 per unit of risk. If you would invest  35,064  in Visa Class A on December 10, 2024 and sell it today you would lose (916.00) from holding Visa Class A or give up 2.61% of portfolio value over 90 days.

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

Visa Class A  vs.  Franklin Growth Allocation

Visa Class A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Franklin Growth Allo

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Visa and Franklin Growth

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

The idea behind Visa Class A and Franklin Growth Allocation 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.