Correlation Between Franklin Biotechnology and Mfs Technology

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

By analyzing existing cross correlation between Franklin Biotechnology Discovery and Mfs Technology Fund, you can compare the effects of market volatilities on Franklin Biotechnology and Mfs Technology 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 Biotechnology with a short position of Mfs Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Biotechnology and Mfs Technology.

Diversification Opportunities for Franklin Biotechnology and Mfs Technology

0.36

Correlation Coefficient

Franklin Biotechnology  Mfs Technology

Weak diversification

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

Pair Corralation between Franklin Biotechnology and Mfs Technology

Assuming the 90 days horizon Franklin Biotechnology Discovery is expected to under-perform the Mfs Technology. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin Biotechnology Discovery is 1.03 times less risky than Mfs Technology. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Mfs Technology Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,358  in Mfs Technology Fund on February 25, 2024 and sell it today you would earn a total of  267.00  from holding Mfs Technology Fund or generate 6.13% return on investment over 90 days.

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

Franklin Biotechnology Discove  vs.  Mfs Technology Fund

Franklin Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mfs Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Technology Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly inconsistent fundamental indicators, Mfs Technology may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Franklin Biotechnology and Mfs Technology

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

The idea behind Franklin Biotechnology Discovery and Mfs Technology Fund 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.