Correlation Between Franklin Microcap and Vanguard Small
Can any of the company-specific risk be diversified away by investing in both Franklin Microcap and Vanguard Small 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 Microcap and Vanguard Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Microcap Value and Vanguard Small Cap Value, you can compare the effects of market volatilities on Franklin Microcap and Vanguard Small 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 Microcap with a short position of Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Microcap and Vanguard Small.
Diversification Opportunities for Franklin Microcap and Vanguard Small
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Microcap Value and Vanguard Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Franklin Microcap 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 Microcap Value are associated (or correlated) with Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Franklin Microcap i.e., Franklin Microcap and Vanguard Small go up and down completely randomly.
Pair Corralation between Franklin Microcap and Vanguard Small
Assuming the 90 days horizon Franklin Microcap is expected to generate 1.38 times less return on investment than Vanguard Small. In addition to that, Franklin Microcap is 1.2 times more volatile than Vanguard Small Cap Value. It trades about 0.04 of its total potential returns per unit of risk. Vanguard Small Cap Value is currently generating about 0.07 per unit of volatility. If you would invest 4,034 in Vanguard Small Cap Value on September 12, 2024 and sell it today you would earn a total of 1,016 from holding Vanguard Small Cap Value or generate 25.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Microcap Value vs. Vanguard Small Cap Value
Performance |
| Timeline |
| Franklin Microcap Value |
| Vanguard Small Cap |
Franklin Microcap and Vanguard Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Microcap and Vanguard Small
The main advantage of trading using opposite Franklin Microcap and Vanguard Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Microcap position performs unexpectedly, Vanguard Small 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 Vanguard Small will offset losses from the drop in Vanguard Small's long position.| Franklin Microcap vs. Vanguard Small Cap Value | Franklin Microcap vs. SCOR PK | Franklin Microcap vs. Morningstar Unconstrained Allocation | Franklin Microcap vs. Thrivent High Yield |
| Vanguard Small vs. Jp Morgan Smartretirement | Vanguard Small vs. Sa Worldwide Moderate | Vanguard Small vs. Fidelity Managed Retirement | Vanguard Small vs. Qs Moderate Growth |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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