Correlation Between Franklin Federal and Sp Smallcap
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Sp Smallcap 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 Federal and Sp Smallcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Federal Tax Free and Sp Smallcap 600, you can compare the effects of market volatilities on Franklin Federal and Sp Smallcap 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 Federal with a short position of Sp Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Sp Smallcap.
Diversification Opportunities for Franklin Federal and Sp Smallcap
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and RYSVX is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Tax Free and Sp Smallcap 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Smallcap 600 and Franklin Federal 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 Federal Tax Free are associated (or correlated) with Sp Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Smallcap 600 has no effect on the direction of Franklin Federal i.e., Franklin Federal and Sp Smallcap go up and down completely randomly.
Pair Corralation between Franklin Federal and Sp Smallcap
Assuming the 90 days horizon Franklin Federal Tax Free is expected to under-perform the Sp Smallcap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin Federal Tax Free is 4.27 times less risky than Sp Smallcap. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Sp Smallcap 600 is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 20,822 in Sp Smallcap 600 on November 5, 2024 and sell it today you would earn a total of 77.00 from holding Sp Smallcap 600 or generate 0.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Federal Tax Free vs. Sp Smallcap 600
Performance |
| Timeline |
| Franklin Federal Tax |
| Sp Smallcap 600 |
Franklin Federal and Sp Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Sp Smallcap
The main advantage of trading using opposite Franklin Federal and Sp Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Sp Smallcap 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 Sp Smallcap will offset losses from the drop in Sp Smallcap's long position.| Franklin Federal vs. Blackrock Financial Institutions | Franklin Federal vs. Fidelity Advisor Financial | Franklin Federal vs. Mesirow Financial Small | Franklin Federal vs. Blackstone Secured Lending |
| Sp Smallcap vs. Prudential High Yield | Sp Smallcap vs. Jpmorgan High Yield | Sp Smallcap vs. Simt High Yield | Sp Smallcap vs. Artisan High Income |
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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