Correlation Between Franklin Small and Transamerica Asset
Can any of the company-specific risk be diversified away by investing in both Franklin Small and Transamerica Asset 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 Transamerica Asset 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 Transamerica Asset Allocation , you can compare the effects of market volatilities on Franklin Small and Transamerica Asset 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 Transamerica Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Small and Transamerica Asset.
Diversification Opportunities for Franklin Small and Transamerica Asset
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Transamerica is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Small Cap and Transamerica Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Asset 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 Transamerica Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Asset has no effect on the direction of Franklin Small i.e., Franklin Small and Transamerica Asset go up and down completely randomly.
Pair Corralation between Franklin Small and Transamerica Asset
Assuming the 90 days horizon Franklin Small Cap is expected to generate 0.75 times more return on investment than Transamerica Asset. However, Franklin Small Cap is 1.34 times less risky than Transamerica Asset. It trades about -0.14 of its potential returns per unit of risk. Transamerica Asset Allocation is currently generating about -0.22 per unit of risk. 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Small Cap vs. Transamerica Asset Allocation
Performance |
| Timeline |
| Franklin Small Cap |
| Transamerica Asset |
Franklin Small and Transamerica Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Small and Transamerica Asset
The main advantage of trading using opposite Franklin Small and Transamerica Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Small position performs unexpectedly, Transamerica Asset 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 Transamerica Asset will offset losses from the drop in Transamerica Asset's long position.| Franklin Small vs. T Rowe Price | Franklin Small vs. Ab Equity Income | Franklin Small vs. T Rowe Price | Franklin Small vs. Enhanced Fixed Income |
| Transamerica Asset vs. Versatile Bond Portfolio | Transamerica Asset vs. T Rowe Price | Transamerica Asset vs. Franklin High Yield | Transamerica Asset vs. T Rowe Price |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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