Correlation Between Smallcap World and Franklin Emerging
Can any of the company-specific risk be diversified away by investing in both Smallcap World and Franklin Emerging 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 Smallcap World and Franklin Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap World Fund and Franklin Emerging Market, you can compare the effects of market volatilities on Smallcap World and Franklin Emerging 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 Smallcap World with a short position of Franklin Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Franklin Emerging.
Diversification Opportunities for Smallcap World and Franklin Emerging
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Smallcap and Franklin is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Franklin Emerging Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Emerging Market and Smallcap 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 Smallcap World Fund are associated (or correlated) with Franklin Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Emerging Market has no effect on the direction of Smallcap World i.e., Smallcap World and Franklin Emerging go up and down completely randomly.
Pair Corralation between Smallcap World and Franklin Emerging
Assuming the 90 days horizon Smallcap World is expected to generate 1.14 times less return on investment than Franklin Emerging. In addition to that, Smallcap World is 3.13 times more volatile than Franklin Emerging Market. It trades about 0.05 of its total potential returns per unit of risk. Franklin Emerging Market is currently generating about 0.18 per unit of volatility. If you would invest 937.00 in Franklin Emerging Market on September 3, 2024 and sell it today you would earn a total of 278.00 from holding Franklin Emerging Market or generate 29.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap World Fund vs. Franklin Emerging Market
Performance |
| Timeline |
| Smallcap World |
| Franklin Emerging Market |
Smallcap World and Franklin Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and Franklin Emerging
The main advantage of trading using opposite Smallcap World and Franklin Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World position performs unexpectedly, Franklin Emerging 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 Emerging will offset losses from the drop in Franklin Emerging's long position.| Smallcap World vs. Champlain Mid Cap | Smallcap World vs. Nationwide Growth Fund | Smallcap World vs. Qs Growth Fund | Smallcap World vs. Goldman Sachs Growth |
| Franklin Emerging vs. Iaadx | Franklin Emerging vs. Sei Daily Income | Franklin Emerging vs. Fa 529 Aggressive | Franklin Emerging vs. Arrow Managed Futures |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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