Correlation Between Franklin and Small-cap Value
Can any of the company-specific risk be diversified away by investing in both Franklin and Small-cap Value 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 and Small-cap Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Government Money and Small Cap Value Fund, you can compare the effects of market volatilities on Franklin and Small-cap Value 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 with a short position of Small-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin and Small-cap Value.
Diversification Opportunities for Franklin and Small-cap Value
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Franklin and Small-cap is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Small Cap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Franklin 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 Government Money are associated (or correlated) with Small-cap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Franklin i.e., Franklin and Small-cap Value go up and down completely randomly.
Pair Corralation between Franklin and Small-cap Value
Assuming the 90 days horizon Franklin Government Money is expected to under-perform the Small-cap Value. In addition to that, Franklin is 2.61 times more volatile than Small Cap Value Fund. It trades about -0.03 of its total potential returns per unit of risk. Small Cap Value Fund is currently generating about 0.01 per unit of volatility. If you would invest 3,526 in Small Cap Value Fund on October 11, 2024 and sell it today you would earn a total of 169.00 from holding Small Cap Value Fund or generate 4.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Franklin Government Money vs. Small Cap Value Fund
Performance |
| Timeline |
| Franklin Government Money |
| Small Cap Value |
Franklin and Small-cap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin and Small-cap Value
The main advantage of trading using opposite Franklin and Small-cap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin position performs unexpectedly, Small-cap Value 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 Small-cap Value will offset losses from the drop in Small-cap Value's long position.| Franklin vs. Mairs Power Growth | Franklin vs. T Rowe Price | Franklin vs. Transamerica Capital Growth | Franklin vs. T Rowe Price |
| Small-cap Value vs. Principal Fds Money | Small-cap Value vs. Fidelity Government Money | Small-cap Value vs. Hewitt Money Market | Small-cap Value vs. Franklin Government Money |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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