Correlation Between Adams Diversified and Franklin Adjustable

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

By analyzing existing cross correlation between Adams Diversified Equity and Franklin Adjustable Government, you can compare the effects of market volatilities on Adams Diversified and Franklin Adjustable 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 Adams Diversified with a short position of Franklin Adjustable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Diversified and Franklin Adjustable.

Diversification Opportunities for Adams Diversified and Franklin Adjustable

-0.5

Correlation Coefficient

Adams Diversified  Franklin Adjustable

Very good diversification

The 3 months correlation between Adams and Franklin is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Adams Diversified Equity and Franklin Adjustable Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Adjustable and Adams Diversified 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 Adams Diversified Equity are associated (or correlated) with Franklin Adjustable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Adjustable has no effect on the direction of Adams Diversified i.e., Adams Diversified and Franklin Adjustable go up and down completely randomly.

Pair Corralation between Adams Diversified and Franklin Adjustable

Assuming the 90 days horizon Adams Diversified Equity is expected to under-perform the Franklin Adjustable. In addition to that, Adams Diversified is 9.25 times more volatile than Franklin Adjustable Government. It trades about -0.1 of its total potential returns per unit of risk. Franklin Adjustable Government is currently generating about 0.23 per unit of volatility. If you would invest  744.00  in Franklin Adjustable Government on December 20, 2024 and sell it today you would earn a total of  12.00  from holding Franklin Adjustable Government or generate 1.61% return on investment over 90 days.

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

Adams Diversified Equity  vs.  Franklin Adjustable Government

Adams Diversified Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adams Diversified Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Franklin Adjustable

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Adjustable Government are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Adjustable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Adams Diversified and Franklin Adjustable

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

The idea behind Adams Diversified Equity and Franklin Adjustable Government 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.