Correlation Between Franklin Adjustable and Cardinal Small
Can any of the company-specific risk be diversified away by investing in both Franklin Adjustable and Cardinal 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 Franklin Adjustable and Cardinal Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Adjustable Government and Cardinal Small Cap, you can compare the effects of market volatilities on Franklin Adjustable and Cardinal 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 Franklin Adjustable with a short position of Cardinal Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Adjustable and Cardinal Small.
Diversification Opportunities for Franklin Adjustable and Cardinal Small
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Franklin and Cardinal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Adjustable Government and Cardinal Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Small Cap and Franklin Adjustable 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 Adjustable Government are associated (or correlated) with Cardinal Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Small Cap has no effect on the direction of Franklin Adjustable i.e., Franklin Adjustable and Cardinal Small go up and down completely randomly.
Pair Corralation between Franklin Adjustable and Cardinal Small
Assuming the 90 days horizon Franklin Adjustable is expected to generate 2.81 times less return on investment than Cardinal Small. But when comparing it to its historical volatility, Franklin Adjustable Government is 7.47 times less risky than Cardinal Small. It trades about 0.15 of its potential returns per unit of risk. Cardinal Small Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,295 in Cardinal Small Cap on November 3, 2024 and sell it today you would earn a total of 149.00 from holding Cardinal Small Cap or generate 11.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Franklin Adjustable Government vs. Cardinal Small Cap
Performance |
| Timeline |
| Franklin Adjustable |
| Cardinal Small Cap |
Franklin Adjustable and Cardinal Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Adjustable and Cardinal Small
The main advantage of trading using opposite Franklin Adjustable and Cardinal Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Adjustable position performs unexpectedly, Cardinal 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 Cardinal Small will offset losses from the drop in Cardinal Small's long position.The idea behind Franklin Adjustable Government and Cardinal Small Cap 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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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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