Correlation Between Franklin Equity and Small Cap
Can any of the company-specific risk be diversified away by investing in both Franklin Equity 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 Equity 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 Equity Income and Small Cap Equity, you can compare the effects of market volatilities on Franklin Equity 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 Equity with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Equity and Small Cap.
Diversification Opportunities for Franklin Equity and Small Cap
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Small is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Equity Income 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 Equity 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 Equity Income 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 Equity i.e., Franklin Equity and Small Cap go up and down completely randomly.
Pair Corralation between Franklin Equity and Small Cap
Assuming the 90 days horizon Franklin Equity Income is expected to under-perform the Small Cap. In addition to that, Franklin Equity is 1.41 times more volatile than Small Cap Equity. It trades about -0.24 of its total potential returns per unit of risk. Small Cap Equity is currently generating about -0.23 per unit of volatility. If you would invest 1,873 in Small Cap Equity on October 17, 2024 and sell it today you would lose (110.00) from holding Small Cap Equity or give up 5.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Equity Income vs. Small Cap Equity
Performance |
| Timeline |
| Franklin Equity Income |
| Small Cap Equity |
Franklin Equity and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Equity and Small Cap
The main advantage of trading using opposite Franklin Equity and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Equity 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 Equity vs. Fidelity Capital Income | Franklin Equity vs. Siit High Yield | Franklin Equity vs. Msift High Yield | Franklin Equity vs. Guggenheim High Yield |
| Small Cap vs. Pace International Equity | Small Cap vs. Morningstar International Equity | Small Cap vs. Guidemark E Fixed | Small Cap vs. Franklin Equity 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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