Correlation Between Touchstone Arbitrage and Franklin Emerging
Can any of the company-specific risk be diversified away by investing in both Touchstone Arbitrage and Franklin Emerging 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 Touchstone Arbitrage and Franklin Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Touchstone Arbitrage Fund and Franklin Emerging Market, you can compare the effects of market volatilities on Touchstone Arbitrage and Franklin Emerging 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 Touchstone Arbitrage with a short position of Franklin Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Arbitrage and Franklin Emerging.
Diversification Opportunities for Touchstone Arbitrage and Franklin Emerging
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Touchstone and Franklin is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Arbitrage Fund and Franklin Emerging Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Emerging Market and Touchstone Arbitrage 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 Touchstone Arbitrage Fund are associated (or correlated) with Franklin Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Emerging Market has no effect on the direction of Touchstone Arbitrage i.e., Touchstone Arbitrage and Franklin Emerging go up and down completely randomly.
Pair Corralation between Touchstone Arbitrage and Franklin Emerging
Assuming the 90 days horizon Touchstone Arbitrage Fund is expected to under-perform the Franklin Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Touchstone Arbitrage Fund is 1.15 times less risky than Franklin Emerging. The mutual fund trades about -0.22 of its potential returns per unit of risk. The Franklin Emerging Market is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,136 in Franklin Emerging Market on January 31, 2024 and sell it today you would earn a total of 1.00 from holding Franklin Emerging Market or generate 0.09% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Touchstone Arbitrage Fund vs. Franklin Emerging Market
Performance |
Timeline |
Touchstone Arbitrage |
Franklin Emerging Market |
Touchstone Arbitrage and Franklin Emerging Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Touchstone Arbitrage and Franklin Emerging
The main advantage of trading using opposite Touchstone Arbitrage and Franklin Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Arbitrage position performs unexpectedly, Franklin Emerging 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 Emerging will offset losses from the drop in Franklin Emerging's long position.Touchstone Arbitrage vs. Touchstone Small Cap | Touchstone Arbitrage vs. Touchstone Sands Capital | Touchstone Arbitrage vs. Mid Cap Growth | Touchstone Arbitrage vs. Mid Cap Growth |
Franklin Emerging vs. Franklin Mutual Beacon | Franklin Emerging vs. Templeton Developing Markets | Franklin Emerging vs. Franklin Mutual Global | Franklin Emerging vs. Franklin Mutual Global |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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