Correlation Between Franklin Small and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Franklin Small and Wells Fargo 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 Wells Fargo 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 Wells Fargo Discovery, you can compare the effects of market volatilities on Franklin Small and Wells Fargo 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 Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Small and Wells Fargo.
Diversification Opportunities for Franklin Small and Wells Fargo
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Wells is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Small Cap and Wells Fargo Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Discovery 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 Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo Discovery has no effect on the direction of Franklin Small i.e., Franklin Small and Wells Fargo go up and down completely randomly.
Pair Corralation between Franklin Small and Wells Fargo
Assuming the 90 days horizon Franklin Small is expected to generate 1.31 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, Franklin Small Cap is 1.07 times less risky than Wells Fargo. It trades about 0.21 of its potential returns per unit of risk. Wells Fargo Discovery is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2,810 in Wells Fargo Discovery on October 24, 2024 and sell it today you would earn a total of 130.00 from holding Wells Fargo Discovery or generate 4.63% 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. Wells Fargo Discovery
Performance |
| Timeline |
| Franklin Small Cap |
| Wells Fargo Discovery |
Franklin Small and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Small and Wells Fargo
The main advantage of trading using opposite Franklin Small and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Small position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo'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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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