Correlation Between Boston Partners and Franklin Mutual

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

By analyzing existing cross correlation between Boston Partners Longshort and Franklin Mutual Global, you can compare the effects of market volatilities on Boston Partners and Franklin Mutual 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 Boston Partners with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Partners and Franklin Mutual.

Diversification Opportunities for Boston Partners and Franklin Mutual

0.7

Correlation Coefficient

Boston Partners  Franklin Mutual

Poor diversification

The 3 months correlation between Boston and Franklin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Boston Partners Longshort and Franklin Mutual Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Global and Boston Partners 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 Boston Partners Longshort are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Global has no effect on the direction of Boston Partners i.e., Boston Partners and Franklin Mutual go up and down completely randomly.

Pair Corralation between Boston Partners and Franklin Mutual

Assuming the 90 days horizon Boston Partners Longshort is expected to generate 0.67 times more return on investment than Franklin Mutual. However, Boston Partners Longshort is 1.5 times less risky than Franklin Mutual. It trades about -0.01 of its potential returns per unit of risk. Franklin Mutual Global is currently generating about -0.03 per unit of risk. If you would invest  1,440  in Boston Partners Longshort on March 29, 2024 and sell it today you would lose (2.00) from holding Boston Partners Longshort or give up 0.14% of portfolio value over 90 days.

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

Boston Partners Longshort  vs.  Franklin Mutual Global

Boston Partners Longshort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Partners Longshort has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Boston Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Mutual Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Mutual Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boston Partners and Franklin Mutual

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

The idea behind Boston Partners Longshort and Franklin Mutual Global 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.