Correlation Between Franklin High and Northern Small
Can any of the company-specific risk be diversified away by investing in both Franklin High and Northern Small 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 High and Northern Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin High Yield and Northern Small Cap, you can compare the effects of market volatilities on Franklin High and Northern Small 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 High with a short position of Northern Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin High and Northern Small.
Diversification Opportunities for Franklin High and Northern Small
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Franklin and Northern is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Yield and Northern Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Small Cap and Franklin High 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 High Yield are associated (or correlated) with Northern Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Small Cap has no effect on the direction of Franklin High i.e., Franklin High and Northern Small go up and down completely randomly.
Pair Corralation between Franklin High and Northern Small
Assuming the 90 days horizon Franklin High is expected to generate 2.27 times less return on investment than Northern Small. But when comparing it to its historical volatility, Franklin High Yield is 4.01 times less risky than Northern Small. It trades about 0.12 of its potential returns per unit of risk. Northern Small Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,452 in Northern Small Cap on September 12, 2024 and sell it today you would earn a total of 725.00 from holding Northern Small Cap or generate 29.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.7% |
| Values | Daily Returns |
Franklin High Yield vs. Northern Small Cap
Performance |
| Timeline |
| Franklin High Yield |
| Northern Small Cap |
Franklin High and Northern Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin High and Northern Small
The main advantage of trading using opposite Franklin High and Northern Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin High position performs unexpectedly, Northern Small 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 Northern Small will offset losses from the drop in Northern Small's long position.| Franklin High vs. Cref Money Market | Franklin High vs. Chestnut Street Exchange | Franklin High vs. Aig Government Money | Franklin High vs. Matson Money Equity |
| Northern Small vs. T Rowe Price | Northern Small vs. Franklin High Yield | Northern Small vs. The National Tax Free | Northern Small vs. Nuveen Minnesota Municipal |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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