Correlation Between Franklin Mutual and International Business
Can any of the company-specific risk be diversified away by investing in both Franklin Mutual and International Business 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 International Business 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 International Business Machines, you can compare the effects of market volatilities on Franklin Mutual and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and International Business.
Diversification Opportunities for Franklin Mutual and International Business
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and International is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and International Business go up and down completely randomly.
Pair Corralation between Franklin Mutual and International Business
Assuming the 90 days horizon Franklin Mutual is expected to generate 3.17 times less return on investment than International Business. But when comparing it to its historical volatility, Franklin Mutual Global is 1.69 times less risky than International Business. It trades about 0.06 of its potential returns per unit of risk. International Business Machines is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 12,471 in International Business Machines on January 21, 2024 and sell it today you would earn a total of 5,687 from holding International Business Machines or generate 45.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Mutual Global vs. International Business Machine
Performance |
| Timeline |
| Franklin Mutual Global |
| International Business |
Franklin Mutual and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Mutual and International Business
The main advantage of trading using opposite Franklin Mutual and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Mutual position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| Franklin Mutual vs. Franklin Mutual Beacon | Franklin Mutual vs. Templeton Developing Markets | Franklin Mutual vs. Templeton Foreign Fund | Franklin Mutual vs. Templeton Foreign Fund |
| International Business vs. Information Services Group | International Business vs. Home Bancorp | International Business vs. CRA International | International Business vs. Aquagold International |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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