Correlation Between Franklin Emerging and Harding Loevner

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

By analyzing existing cross correlation between Franklin Emerging Market and Harding Loevner Emerging, you can compare the effects of market volatilities on Franklin Emerging and Harding Loevner 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 Emerging with a short position of Harding Loevner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Emerging and Harding Loevner.

Diversification Opportunities for Franklin Emerging and Harding Loevner

0.77

Correlation Coefficient

Franklin Emerging  Harding Loevner

Poor diversification

The 3 months correlation between Franklin and Harding is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Emerging Market and Harding Loevner Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Emerging and Franklin Emerging 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 Emerging Market are associated (or correlated) with Harding Loevner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harding Loevner Emerging has no effect on the direction of Franklin Emerging i.e., Franklin Emerging and Harding Loevner go up and down completely randomly.

Pair Corralation between Franklin Emerging and Harding Loevner

Assuming the 90 days horizon Franklin Emerging Market is expected to generate 0.31 times more return on investment than Harding Loevner. However, Franklin Emerging Market is 3.22 times less risky than Harding Loevner. It trades about 0.31 of its potential returns per unit of risk. Harding Loevner Emerging is currently generating about 0.05 per unit of risk. If you would invest  1,012  in Franklin Emerging Market on February 2, 2024 and sell it today you would earn a total of  115.00  from holding Franklin Emerging Market or generate 11.36% return on investment over 90 days.

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

Franklin Emerging Market  vs.  Harding Loevner Emerging

Franklin Emerging Market

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Emerging Market are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Franklin Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Harding Loevner Emerging

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Harding Loevner Emerging are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Harding Loevner is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Emerging and Harding Loevner

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

The idea behind Franklin Emerging Market and Harding Loevner Emerging 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.