Correlation Between Moderate Strategy and Franklin Growth

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Can any of the company-specific risk be diversified away by investing in both Moderate Strategy and Franklin Growth 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 Moderate Strategy and Franklin Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Moderate Strategy Fund and Franklin Growth Opportunities, you can compare the effects of market volatilities on Moderate Strategy and Franklin Growth 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 Moderate Strategy with a short position of Franklin Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderate Strategy and Franklin Growth.

Diversification Opportunities for Moderate Strategy and Franklin Growth

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Moderate and Franklin is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Strategy Fund and Franklin Growth Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Growth Oppo and Moderate Strategy 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 Moderate Strategy Fund are associated (or correlated) with Franklin Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Growth Oppo has no effect on the direction of Moderate Strategy i.e., Moderate Strategy and Franklin Growth go up and down completely randomly.

Pair Corralation between Moderate Strategy and Franklin Growth

Assuming the 90 days horizon Moderate Strategy is expected to generate 1.81 times less return on investment than Franklin Growth. But when comparing it to its historical volatility, Moderate Strategy Fund is 3.05 times less risky than Franklin Growth. It trades about 0.07 of its potential returns per unit of risk. Franklin Growth Opportunities is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,165  in Franklin Growth Opportunities on May 1, 2025 and sell it today you would earn a total of  831.00  from holding Franklin Growth Opportunities or generate 16.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Moderate Strategy Fund  vs.  Franklin Growth Opportunities

 Performance 
       Timeline  
Moderate Strategy 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Moderate Strategy Fund are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Moderate Strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Franklin Growth Oppo 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Growth Opportunities are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Franklin Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Moderate Strategy and Franklin Growth Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Moderate Strategy and Franklin Growth

The main advantage of trading using opposite Moderate Strategy and Franklin Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moderate Strategy position performs unexpectedly, Franklin Growth 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 Growth will offset losses from the drop in Franklin Growth's long position.
The idea behind Moderate Strategy Fund and Franklin Growth Opportunities 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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