Correlation Between Templeton World and Franklin

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

By analyzing existing cross correlation between Templeton World Fund and Franklin K2 Alternative, you can compare the effects of market volatilities on Templeton World and Franklin 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 Templeton World with a short position of Franklin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton World and Franklin.

Diversification Opportunities for Templeton World and Franklin

0.98

Correlation Coefficient

Templeton World  Franklin

Almost no diversification

The 3 months correlation between Templeton and Franklin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Templeton World Fund and Franklin K2 Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin K2 Alternative and Templeton World 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 Templeton World Fund are associated (or correlated) with Franklin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin K2 Alternative has no effect on the direction of Templeton World i.e., Templeton World and Franklin go up and down completely randomly.

Pair Corralation between Templeton World and Franklin

Assuming the 90 days horizon Templeton World Fund is expected to generate 3.46 times more return on investment than Franklin. However, Templeton World is 3.46 times more volatile than Franklin K2 Alternative. It trades about 0.23 of its potential returns per unit of risk. Franklin K2 Alternative is currently generating about 0.21 per unit of risk. If you would invest  1,660  in Templeton World Fund on May 6, 2025 and sell it today you would earn a total of  179.00  from holding Templeton World Fund or generate 10.78% return on investment over 90 days.

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

Templeton World Fund  vs.  Franklin K2 Alternative

Templeton World

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Templeton World Fund are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Templeton World may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Franklin K2 Alternative

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin K2 Alternative are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Franklin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Templeton World and Franklin

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

The idea behind Templeton World Fund and Franklin K2 Alternative 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.