Correlation Between Franklin Emerging and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Franklin Emerging and Mid Cap 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 Mid Cap 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 Mid Cap 15x Strategy, you can compare the effects of market volatilities on Franklin Emerging and Mid Cap 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 Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Emerging and Mid Cap.
Diversification Opportunities for Franklin Emerging and Mid Cap
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Mid is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Emerging Market and Mid Cap 15x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap 15x 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 Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap 15x has no effect on the direction of Franklin Emerging i.e., Franklin Emerging and Mid Cap go up and down completely randomly.
Pair Corralation between Franklin Emerging and Mid Cap
Assuming the 90 days horizon Franklin Emerging is expected to generate 2.18 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Franklin Emerging Market is 6.1 times less risky than Mid Cap. It trades about 0.27 of its potential returns per unit of risk. Mid Cap 15x Strategy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 10,059 in Mid Cap 15x Strategy on September 14, 2024 and sell it today you would earn a total of 4,227 from holding Mid Cap 15x Strategy or generate 42.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Emerging Market vs. Mid Cap 15x Strategy
Performance |
| Timeline |
| Franklin Emerging Market |
| Mid Cap 15x |
Franklin Emerging and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Emerging and Mid Cap
The main advantage of trading using opposite Franklin Emerging and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Emerging position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.| Franklin Emerging vs. Alger Health Sciences | Franklin Emerging vs. Highland Longshort Healthcare | Franklin Emerging vs. Baron Health Care | Franklin Emerging vs. Tekla Healthcare Opportunities |
| Mid Cap vs. Baillie Gifford Health | Mid Cap vs. Lord Abbett Health | Mid Cap vs. Allianzgi Health Sciences | Mid Cap vs. Vanguard Health Care |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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