Correlation Between Dow Jones and Franklin Small
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Franklin Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Franklin Small Cap, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Franklin Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Franklin Small.
Diversification Opportunities for Dow Jones and Franklin Small
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Franklin is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Franklin Small go up and down completely randomly.
Pair Corralation between Dow Jones and Franklin Small
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Franklin Small. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 1.58 times less risky than Franklin Small. The index trades about -0.22 of its potential returns per unit of risk. The Franklin Small Cap is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 1,665 in Franklin Small Cap on October 11, 2024 and sell it today you would lose (58.00) from holding Franklin Small Cap or give up 3.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Franklin Small Cap
Performance |
| Timeline |
Dow Jones and Franklin Small Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Franklin Small Cap
Pair trading matchups for Franklin Small
Pair Trading with Dow Jones and Franklin Small
The main advantage of trading using opposite Dow Jones and Franklin Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Toro | Dow Jones vs. Foot Locker | Dow Jones vs. Abercrombie Fitch | Dow Jones vs. 51Talk Online Education |
| Franklin Small vs. T Rowe Price | Franklin Small vs. Ab Equity Income | Franklin Small vs. T Rowe Price | Franklin Small vs. Enhanced Fixed Income |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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