Correlation Between Franklin Small and American Funds
Can any of the company-specific risk be diversified away by investing in both Franklin Small and American Funds 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 Small and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Small Cap and American Funds Fundamental, you can compare the effects of market volatilities on Franklin Small and American Funds 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 Small with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Small and American Funds.
Diversification Opportunities for Franklin Small and American Funds
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and American is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Small Cap and American Funds Fundamental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Funda and Franklin Small 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 Small Cap are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Funda has no effect on the direction of Franklin Small i.e., Franklin Small and American Funds go up and down completely randomly.
Pair Corralation between Franklin Small and American Funds
Assuming the 90 days horizon Franklin Small Cap is expected to generate 0.61 times more return on investment than American Funds. However, Franklin Small Cap is 1.64 times less risky than American Funds. It trades about -0.06 of its potential returns per unit of risk. American Funds Fundamental is currently generating about -0.06 per unit of risk. If you would invest 1,694 in Franklin Small Cap on October 23, 2024 and sell it today you would lose (43.00) from holding Franklin Small Cap or give up 2.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Small Cap vs. American Funds Fundamental
Performance |
| Timeline |
| Franklin Small Cap |
| American Funds Funda |
Franklin Small and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Small and American Funds
The main advantage of trading using opposite Franklin Small and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Small position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Franklin Small vs. Dunham Porategovernment Bond | Franklin Small vs. Schwab Government Money | Franklin Small vs. Virtus Seix Government | Franklin Small vs. Elfun Government Money |
| American Funds vs. Small Pany Growth | American Funds vs. Needham Small Cap | American Funds vs. Praxis Small Cap | American Funds vs. Franklin Small Cap |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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