Correlation Between Franklin and Small Cap
Can any of the company-specific risk be diversified away by investing in both Franklin and Small 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 and Small Cap 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 Equity, you can compare the effects of market volatilities on Franklin and Small 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 with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin and Small Cap.
Diversification Opportunities for Franklin and Small Cap
Excellent diversification
The 3 months correlation between Franklin and Small is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity 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. 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 Equity has no effect on the direction of Franklin i.e., Franklin and Small Cap go up and down completely randomly.
Pair Corralation between Franklin and Small Cap
If you would invest 1,784 in Small Cap Equity on November 3, 2024 and sell it today you would earn a total of 90.00 from holding Small Cap Equity or generate 5.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Government Money vs. Small Cap Equity
Performance |
| Timeline |
| Franklin Government Money |
| Small Cap Equity |
Franklin and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin and Small Cap
The main advantage of trading using opposite Franklin and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin position performs unexpectedly, Small 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 Small Cap will offset losses from the drop in Small Cap's long position.| Franklin vs. Gmo High Yield | Franklin vs. Pace High Yield | Franklin vs. Massmutual Premier High | Franklin vs. The Hartford High |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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