Correlation Between Affiliated Managers and Franklin Resources

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

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

Diversification Opportunities for Affiliated Managers and Franklin Resources

0.59

Correlation Coefficient

Affiliated Managers  Franklin Resources

Very weak diversification

The 3 months correlation between Affiliated and Franklin is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Affiliated Managers Group and Franklin Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Resources and Affiliated Managers 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 Affiliated Managers Group are associated (or correlated) with Franklin Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Resources has no effect on the direction of Affiliated Managers i.e., Affiliated Managers and Franklin Resources go up and down completely randomly.

Pair Corralation between Affiliated Managers and Franklin Resources

Considering the 90-day investment horizon Affiliated Managers Group is expected to under-perform the Franklin Resources. But the stock apears to be less risky and, when comparing its historical volatility, Affiliated Managers Group is 1.07 times less risky than Franklin Resources. The stock trades about -0.06 of its potential returns per unit of risk. The Franklin Resources is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,867  in Franklin Resources on January 13, 2025 and sell it today you would lose (77.00) from holding Franklin Resources or give up 4.12% of portfolio value over 90 days.

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

Affiliated Managers Group  vs.  Franklin Resources

Affiliated Managers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Affiliated Managers Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Franklin Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Franklin Resources is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Affiliated Managers and Franklin Resources

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

The idea behind Affiliated Managers Group and Franklin Resources 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.