Correlation Between Franklin Small and Franklin New
Can any of the company-specific risk be diversified away by investing in both Franklin Small and Franklin New 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 Franklin New 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 Franklin New Jersey, you can compare the effects of market volatilities on Franklin Small and Franklin New 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 Franklin New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Small and Franklin New.
Diversification Opportunities for Franklin Small and Franklin New
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Franklin is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Small Cap and Franklin New Jersey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin New Jersey 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 Franklin New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin New Jersey has no effect on the direction of Franklin Small i.e., Franklin Small and Franklin New go up and down completely randomly.
Pair Corralation between Franklin Small and Franklin New
Assuming the 90 days horizon Franklin Small Cap is expected to generate 4.03 times more return on investment than Franklin New. However, Franklin Small is 4.03 times more volatile than Franklin New Jersey. It trades about 0.21 of its potential returns per unit of risk. Franklin New Jersey is currently generating about 0.02 per unit of risk. If you would invest 1,595 in Franklin Small Cap on October 24, 2024 and sell it today you would earn a total of 56.00 from holding Franklin Small Cap or generate 3.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Small Cap vs. Franklin New Jersey
Performance |
| Timeline |
| Franklin Small Cap |
| Franklin New Jersey |
Franklin Small and Franklin New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Small and Franklin New
The main advantage of trading using opposite Franklin Small and Franklin New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Small position performs unexpectedly, Franklin New 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 New will offset losses from the drop in Franklin New's long position.| Franklin Small vs. Barings High Yield | Franklin Small vs. Nuveen High Yield | Franklin Small vs. Georgia Tax Free Bond | Franklin Small vs. Siit High Yield |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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