Correlation Between Franklin Real and Small Cap
Can any of the company-specific risk be diversified away by investing in both Franklin Real 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 Real 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 Real Estate and Small Cap Stock, you can compare the effects of market volatilities on Franklin Real 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 Real with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Real and Small Cap.
Diversification Opportunities for Franklin Real and Small Cap
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FRANKLIN and Small is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Real Estate and Small Cap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Stock and Franklin Real 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 Real Estate 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 Stock has no effect on the direction of Franklin Real i.e., Franklin Real and Small Cap go up and down completely randomly.
Pair Corralation between Franklin Real and Small Cap
Assuming the 90 days horizon Franklin Real is expected to generate 1.78 times less return on investment than Small Cap. But when comparing it to its historical volatility, Franklin Real Estate is 1.11 times less risky than Small Cap. It trades about 0.02 of its potential returns per unit of risk. Small Cap Stock is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,271 in Small Cap Stock on September 3, 2024 and sell it today you would earn a total of 292.00 from holding Small Cap Stock or generate 22.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Real Estate vs. Small Cap Stock
Performance |
| Timeline |
| Franklin Real Estate |
| Small Cap Stock |
Franklin Real and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Real and Small Cap
The main advantage of trading using opposite Franklin Real and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Real 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 Real vs. Franklin Natural Resources | Franklin Real vs. Franklin Small Cap | Franklin Real vs. Templeton Developing Markets | Franklin Real vs. Franklin Balance Sheet |
| Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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