Correlation Between Transamerica Asset and Franklin Equity

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

By analyzing existing cross correlation between Transamerica Asset Allocation and Franklin Equity Income, you can compare the effects of market volatilities on Transamerica Asset and Franklin Equity 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 Transamerica Asset with a short position of Franklin Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transamerica Asset and Franklin Equity.

Diversification Opportunities for Transamerica Asset and Franklin Equity

0.98

Correlation Coefficient

Transamerica Asset  Franklin Equity

Almost no diversification

The 3 months correlation between Transamerica and Franklin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica Asset Allocation and Franklin Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Equity Income and Transamerica Asset 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 Transamerica Asset Allocation are associated (or correlated) with Franklin Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Equity Income has no effect on the direction of Transamerica Asset i.e., Transamerica Asset and Franklin Equity go up and down completely randomly.

Pair Corralation between Transamerica Asset and Franklin Equity

Assuming the 90 days horizon Transamerica Asset is expected to generate 1.6 times less return on investment than Franklin Equity. But when comparing it to its historical volatility, Transamerica Asset Allocation is 1.59 times less risky than Franklin Equity. It trades about 0.26 of its potential returns per unit of risk. Franklin Equity Income is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  3,029  in Franklin Equity Income on May 6, 2025 and sell it today you would earn a total of  319.00  from holding Franklin Equity Income or generate 10.53% return on investment over 90 days.

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

Transamerica Asset Allocation  vs.  Franklin Equity Income

Transamerica Asset

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Asset Allocation are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Transamerica Asset may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Franklin Equity Income

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Equity Income are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Franklin Equity may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Transamerica Asset and Franklin Equity

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

The idea behind Transamerica Asset Allocation and Franklin Equity Income 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.