Correlation Between American Funds and Franklin Small
Can any of the company-specific risk be diversified away by investing in both American Funds and Franklin Small 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 American Funds and Franklin Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds International and Franklin Small Cap, you can compare the effects of market volatilities on American Funds and Franklin Small 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 American Funds with a short position of Franklin Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Franklin Small.
Diversification Opportunities for American Funds and Franklin Small
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Franklin is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding American Funds International and Franklin Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Small Cap and American Funds 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 American Funds International are associated (or correlated) with Franklin Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Small Cap has no effect on the direction of American Funds i.e., American Funds and Franklin Small go up and down completely randomly.
Pair Corralation between American Funds and Franklin Small
Assuming the 90 days horizon American Funds is expected to generate 1.06 times less return on investment than Franklin Small. But when comparing it to its historical volatility, American Funds International is 1.39 times less risky than Franklin Small. It trades about 0.37 of its potential returns per unit of risk. Franklin Small Cap is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 1,584 in Franklin Small Cap on November 3, 2024 and sell it today you would earn a total of 96.00 from holding Franklin Small Cap or generate 6.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds International vs. Franklin Small Cap
Performance |
| Timeline |
| American Funds Inter |
| Franklin Small Cap |
American Funds and Franklin Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Franklin Small
The main advantage of trading using opposite American Funds and Franklin Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Franklin Small 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 Small will offset losses from the drop in Franklin Small's long position.| American Funds vs. Vy Clarion Real | American Funds vs. Dunham Real Estate | American Funds vs. Nexpoint Real Estate | American Funds vs. Forum Real Estate |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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