Correlation Between Baird Small/mid and Franklin Natural
Can any of the company-specific risk be diversified away by investing in both Baird Small/mid and Franklin Natural 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 Baird Small/mid and Franklin Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baird Smallmid Cap and Franklin Natural Resources, you can compare the effects of market volatilities on Baird Small/mid and Franklin Natural 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 Baird Small/mid with a short position of Franklin Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baird Small/mid and Franklin Natural.
Diversification Opportunities for Baird Small/mid and Franklin Natural
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baird and Franklin is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Baird Smallmid Cap and Franklin Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Natural Res and Baird Small/mid 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 Baird Smallmid Cap are associated (or correlated) with Franklin Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Natural Res has no effect on the direction of Baird Small/mid i.e., Baird Small/mid and Franklin Natural go up and down completely randomly.
Pair Corralation between Baird Small/mid and Franklin Natural
Assuming the 90 days horizon Baird Smallmid Cap is expected to generate 1.47 times more return on investment than Franklin Natural. However, Baird Small/mid is 1.47 times more volatile than Franklin Natural Resources. It trades about 0.38 of its potential returns per unit of risk. Franklin Natural Resources is currently generating about 0.28 per unit of risk. If you would invest 1,658 in Baird Smallmid Cap on September 2, 2024 and sell it today you would earn a total of 170.00 from holding Baird Smallmid Cap or generate 10.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baird Smallmid Cap vs. Franklin Natural Resources
Performance |
| Timeline |
| Baird Smallmid Cap |
| Franklin Natural Res |
Baird Small/mid and Franklin Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baird Small/mid and Franklin Natural
The main advantage of trading using opposite Baird Small/mid and Franklin Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baird Small/mid position performs unexpectedly, Franklin Natural 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 Natural will offset losses from the drop in Franklin Natural's long position.| Baird Small/mid vs. Franklin Natural Resources | Baird Small/mid vs. World Energy Fund | Baird Small/mid vs. Oil Gas Ultrasector | Baird Small/mid vs. Short Oil Gas |
| Franklin Natural vs. Legg Mason Bw | Franklin Natural vs. Qs Large Cap | Franklin Natural vs. Dodge Cox Stock | Franklin Natural vs. Fidelity Series 1000 |
Check out your portfolio center.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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