Correlation Between Franklin Small and Franklin Growth
Can any of the company-specific risk be diversified away by investing in both Franklin Small and Franklin Growth 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 Small and Franklin Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Small Cap and Franklin Growth Fund, you can compare the effects of market volatilities on Franklin Small and Franklin Growth 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 Small with a short position of Franklin Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Small and Franklin Growth.
Diversification Opportunities for Franklin Small and Franklin Growth
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Franklin is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Small Cap and Franklin Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Growth and Franklin Small 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 Small Cap are associated (or correlated) with Franklin Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Growth has no effect on the direction of Franklin Small i.e., Franklin Small and Franklin Growth go up and down completely randomly.
Pair Corralation between Franklin Small and Franklin Growth
Assuming the 90 days horizon Franklin Small Cap is expected to generate 1.84 times more return on investment than Franklin Growth. However, Franklin Small is 1.84 times more volatile than Franklin Growth Fund. It trades about 0.22 of its potential returns per unit of risk. Franklin Growth Fund is currently generating about 0.05 per unit of risk. If you would invest 6,428 in Franklin Small Cap on August 30, 2024 and sell it today you would earn a total of 559.00 from holding Franklin Small Cap or generate 8.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Small Cap vs. Franklin Growth Fund
Performance |
| Timeline |
| Franklin Small Cap |
| Franklin Growth |
Franklin Small and Franklin Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Small and Franklin Growth
The main advantage of trading using opposite Franklin Small and Franklin Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Small position performs unexpectedly, Franklin Growth 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 Franklin Growth will offset losses from the drop in Franklin Growth's long position.| Franklin Small vs. Franklin Mutual Beacon | Franklin Small vs. Templeton Developing Markets | Franklin Small vs. Franklin Mutual Global | Franklin Small vs. Franklin Mutual Global |
| Franklin Growth vs. Franklin Mutual Beacon | Franklin Growth vs. Templeton Developing Markets | Franklin Growth vs. Franklin Mutual Global | Franklin Growth vs. Franklin Mutual Global |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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