Correlation Between Franklin Emerging and Smallcap World
Can any of the company-specific risk be diversified away by investing in both Franklin Emerging and Smallcap World 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 Emerging and Smallcap World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Emerging Market and Smallcap World Fund, you can compare the effects of market volatilities on Franklin Emerging and Smallcap World 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 Emerging with a short position of Smallcap World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Emerging and Smallcap World.
Diversification Opportunities for Franklin Emerging and Smallcap World
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Smallcap is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Emerging Market and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World and Franklin Emerging 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 Emerging Market are associated (or correlated) with Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Franklin Emerging i.e., Franklin Emerging and Smallcap World go up and down completely randomly.
Pair Corralation between Franklin Emerging and Smallcap World
Assuming the 90 days horizon Franklin Emerging Market is expected to generate 0.32 times more return on investment than Smallcap World. However, Franklin Emerging Market is 3.13 times less risky than Smallcap World. It trades about 0.19 of its potential returns per unit of risk. Smallcap World Fund is currently generating about 0.05 per unit of risk. If you would invest 931.00 in Franklin Emerging Market on September 2, 2024 and sell it today you would earn a total of 284.00 from holding Franklin Emerging Market or generate 30.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Emerging Market vs. Smallcap World Fund
Performance |
| Timeline |
| Franklin Emerging Market |
| Smallcap World |
Franklin Emerging and Smallcap World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Emerging and Smallcap World
The main advantage of trading using opposite Franklin Emerging and Smallcap World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Emerging position performs unexpectedly, Smallcap World 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 Smallcap World will offset losses from the drop in Smallcap World's long position.| Franklin Emerging vs. Delaware Limited Term Diversified | Franklin Emerging vs. The Gabelli Small | Franklin Emerging vs. Harbor Diversified International | Franklin Emerging vs. Western Asset Diversified |
| Smallcap World vs. Iaadx | Smallcap World vs. Qs Large Cap | Smallcap World vs. Western Asset Municipal | Smallcap World vs. Rbc Microcap Value |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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