Correlation Between International Fund and Franklin Federal

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

By analyzing existing cross correlation between International Fund I and Franklin Federal Limited Term, you can compare the effects of market volatilities on International Fund and Franklin Federal 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 International Fund with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Fund and Franklin Federal.

Diversification Opportunities for International Fund and Franklin Federal

0.92

Correlation Coefficient

International Fund  Franklin Federal

Almost no diversification

The 3 months correlation between International and Franklin is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding International Fund I and Franklin Federal Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Federal Lim and International Fund 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 International Fund I are associated (or correlated) with Franklin Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Federal Lim has no effect on the direction of International Fund i.e., International Fund and Franklin Federal go up and down completely randomly.

Pair Corralation between International Fund and Franklin Federal

Assuming the 90 days horizon International Fund I is expected to generate 8.95 times more return on investment than Franklin Federal. However, International Fund is 8.95 times more volatile than Franklin Federal Limited Term. It trades about 0.14 of its potential returns per unit of risk. Franklin Federal Limited Term is currently generating about 0.31 per unit of risk. If you would invest  1,493  in International Fund I on July 13, 2025 and sell it today you would earn a total of  98.00  from holding International Fund I or generate 6.56% return on investment over 90 days.

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

International Fund I  vs.  Franklin Federal Limited Term

International Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Fund I are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, International Fund may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Franklin Federal Lim

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Federal Limited Term are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Federal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with International Fund and Franklin Federal

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

The idea behind International Fund I and Franklin Federal Limited Term 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 Anywhere module to track or share privately all of your investments from the convenience of any device.