Correlation Between Franklin Small and Fidelity Freedom
Can any of the company-specific risk be diversified away by investing in both Franklin Small and Fidelity Freedom 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 Fidelity Freedom 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 Fidelity Freedom Index, you can compare the effects of market volatilities on Franklin Small and Fidelity Freedom 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 Fidelity Freedom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Small and Fidelity Freedom.
Diversification Opportunities for Franklin Small and Fidelity Freedom
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Fidelity is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Small Cap and Fidelity Freedom Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom Index 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 Fidelity Freedom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Freedom Index has no effect on the direction of Franklin Small i.e., Franklin Small and Fidelity Freedom go up and down completely randomly.
Pair Corralation between Franklin Small and Fidelity Freedom
Assuming the 90 days horizon Franklin Small Cap is expected to generate 1.31 times more return on investment than Fidelity Freedom. However, Franklin Small is 1.31 times more volatile than Fidelity Freedom Index. It trades about 0.27 of its potential returns per unit of risk. Fidelity Freedom Index is currently generating about 0.1 per unit of risk. If you would invest 1,609 in Franklin Small Cap on October 25, 2024 and sell it today you would earn a total of 80.00 from holding Franklin Small Cap or generate 4.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Franklin Small Cap vs. Fidelity Freedom Index
Performance |
| Timeline |
| Franklin Small Cap |
| Fidelity Freedom Index |
Franklin Small and Fidelity Freedom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Small and Fidelity Freedom
The main advantage of trading using opposite Franklin Small and Fidelity Freedom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Small position performs unexpectedly, Fidelity Freedom 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 Fidelity Freedom will offset losses from the drop in Fidelity Freedom's long position.| Franklin Small vs. Putnam International Capital | Franklin Small vs. Putnam Small Cap | Franklin Small vs. Putnam Equity Income | Franklin Small vs. Putnam Growth Opportunities |
| Fidelity Freedom vs. Vy Columbia Small | Fidelity Freedom vs. Franklin Small Cap | Fidelity Freedom vs. Small Pany Growth | Fidelity Freedom vs. Sp Smallcap 600 |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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