Correlation Between Franklin Small and Transamerica Large
Can any of the company-specific risk be diversified away by investing in both Franklin Small and Transamerica Large 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 Large 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 Large Cap, you can compare the effects of market volatilities on Franklin Small and Transamerica Large 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 Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Small and Transamerica Large.
Diversification Opportunities for Franklin Small and Transamerica Large
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Transamerica is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Small Cap and Transamerica Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Cap 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 Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Large Cap has no effect on the direction of Franklin Small i.e., Franklin Small and Transamerica Large go up and down completely randomly.
Pair Corralation between Franklin Small and Transamerica Large
Assuming the 90 days horizon Franklin Small is expected to generate 1.13 times less return on investment than Transamerica Large. In addition to that, Franklin Small is 1.4 times more volatile than Transamerica Large Cap. It trades about 0.2 of its total potential returns per unit of risk. Transamerica Large Cap is currently generating about 0.31 per unit of volatility. If you would invest 1,459 in Transamerica Large Cap on November 5, 2024 and sell it today you would earn a total of 63.00 from holding Transamerica Large Cap or generate 4.32% 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. Transamerica Large Cap
Performance |
| Timeline |
| Franklin Small Cap |
| Transamerica Large Cap |
Franklin Small and Transamerica Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Small and Transamerica Large
The main advantage of trading using opposite Franklin Small and Transamerica Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Small position performs unexpectedly, Transamerica Large 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 Large will offset losses from the drop in Transamerica Large's long position.| Franklin Small vs. Allianzgi Technology Fund | Franklin Small vs. Science Technology Fund | Franklin Small vs. Invesco Technology Fund | Franklin Small vs. Dreyfus Technology Growth |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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