Correlation Between Franklin Natural and Baird Small/mid
Can any of the company-specific risk be diversified away by investing in both Franklin Natural and Baird Small/mid 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 Natural and Baird Small/mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Natural Resources and Baird Smallmid Cap, you can compare the effects of market volatilities on Franklin Natural and Baird Small/mid 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 Natural with a short position of Baird Small/mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Natural and Baird Small/mid.
Diversification Opportunities for Franklin Natural and Baird Small/mid
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Baird is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Natural Resources and Baird Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Smallmid Cap and Franklin Natural 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 Natural Resources are associated (or correlated) with Baird Small/mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Smallmid Cap has no effect on the direction of Franklin Natural i.e., Franklin Natural and Baird Small/mid go up and down completely randomly.
Pair Corralation between Franklin Natural and Baird Small/mid
Assuming the 90 days horizon Franklin Natural Resources is expected to under-perform the Baird Small/mid. In addition to that, Franklin Natural is 1.06 times more volatile than Baird Smallmid Cap. It trades about -0.09 of its total potential returns per unit of risk. Baird Smallmid Cap is currently generating about -0.07 per unit of volatility. If you would invest 1,553 in Baird Smallmid Cap on January 13, 2025 and sell it today you would lose (80.00) from holding Baird Smallmid Cap or give up 5.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Natural Resources vs. Baird Smallmid Cap
Performance |
| Timeline |
| Franklin Natural Res |
| Baird Smallmid Cap |
Franklin Natural and Baird Small/mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Natural and Baird Small/mid
The main advantage of trading using opposite Franklin Natural and Baird Small/mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Natural position performs unexpectedly, Baird Small/mid 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 Baird Small/mid will offset losses from the drop in Baird Small/mid's long position.| Franklin Natural vs. Intermediate Term Bond Fund | Franklin Natural vs. Doubleline E Fixed | Franklin Natural vs. Federated Municipal Ultrashort | Franklin Natural vs. Old Westbury Fixed |
| Baird Small/mid vs. Baird Aggregate Bond | Baird Small/mid vs. Baird Aggregate Bond | Baird Small/mid vs. Baird Short Term Bond | Baird Small/mid vs. Baird Short Term Bond |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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