Correlation Between Franklin Mutual and K2 Alternative

Can any of the company-specific risk be diversified away by investing in both Franklin Mutual and K2 Alternative 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 Franklin Mutual and K2 Alternative into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Franklin Mutual and K2 Alternative

0.14

Correlation Coefficient

Franklin Mutual  K2 Alternative

Average diversification

The 3 months correlation between Franklin and FSKKX is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Mutual Global and K2 Alternative Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K2 Alternative Strategies and Franklin Mutual 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 Franklin Mutual Global are associated (or correlated) with K2 Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K2 Alternative Strategies has no effect on the direction of Franklin Mutual i.e., Franklin Mutual and K2 Alternative go up and down completely randomly.

Pair Corralation between Franklin Mutual and K2 Alternative

Assuming the 90 days horizon Franklin Mutual Global is expected to generate 3.68 times more return on investment than K2 Alternative. However, Franklin Mutual is 3.68 times more volatile than K2 Alternative Strategies. It trades about 0.05 of its potential returns per unit of risk. K2 Alternative Strategies is currently generating about 0.15 per unit of risk. If you would invest  2,777  in Franklin Mutual Global on August 31, 2024 and sell it today you would earn a total of  424.00  from holding Franklin Mutual Global or generate 15.27% return on investment over 90 days.

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

Franklin Mutual Global  vs.  K2 Alternative Strategies

Franklin Mutual Global

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Mutual Global are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Franklin Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

K2 Alternative Strategies

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in K2 Alternative Strategies are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, K2 Alternative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Mutual and K2 Alternative

The main advantage of trading using opposite Franklin Mutual and K2 Alternative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Mutual position performs unexpectedly, K2 Alternative 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 K2 Alternative will offset losses from the drop in K2 Alternative's long position.

The idea behind Franklin Mutual Global and K2 Alternative Strategies 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.