Correlation Between Franklin Mutual and Capital World

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Can any of the company-specific risk be diversified away by investing in both Franklin Mutual and Capital World 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 Capital World 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 Capital World Growth, you can compare the effects of market volatilities on Franklin Mutual and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Mutual and Capital World.

Diversification Opportunities for Franklin Mutual and Capital World

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Franklin and Capital is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding FRANKLIN MUTUAL GLOBAL and CAPITAL WORLD GROWTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and Capital World go up and down completely randomly.

Pair Corralation between Franklin Mutual and Capital World

Assuming the 90 days horizon Franklin Mutual Global is expected to generate 0.67 times more return on investment than Capital World. However, Franklin Mutual Global is 1.49 times less risky than Capital World. It trades about 0.49 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.24 per unit of risk. If you would invest  3,107  in Franklin Mutual Global on December 29, 2023 and sell it today you would earn a total of  146.00  from holding Franklin Mutual Global or generate 4.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

FRANKLIN MUTUAL GLOBAL  vs.  CAPITAL WORLD GROWTH

 Performance 
       Timeline  
Franklin Mutual Global 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Mutual Global are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Capital World Growth 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Capital World Growth are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Capital World may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Franklin Mutual and Capital World Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Franklin Mutual and Capital World

The main advantage of trading using opposite Franklin Mutual and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Mutual position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.
The idea behind Franklin Mutual Global and Capital World Growth 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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