Correlation Between Franklin and Midcap Sp
Can any of the company-specific risk be diversified away by investing in both Franklin and Midcap Sp 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 and Midcap Sp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Government Money and Midcap Sp 400, you can compare the effects of market volatilities on Franklin and Midcap Sp 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 with a short position of Midcap Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin and Midcap Sp.
Diversification Opportunities for Franklin and Midcap Sp
Poor diversification
The 3 months correlation between Franklin and Midcap is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Midcap Sp 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Sp 400 and Franklin 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 Government Money are associated (or correlated) with Midcap Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Sp 400 has no effect on the direction of Franklin i.e., Franklin and Midcap Sp go up and down completely randomly.
Pair Corralation between Franklin and Midcap Sp
Assuming the 90 days horizon Franklin is expected to generate 5.9 times less return on investment than Midcap Sp. But when comparing it to its historical volatility, Franklin Government Money is 7.96 times less risky than Midcap Sp. It trades about 0.13 of its potential returns per unit of risk. Midcap Sp 400 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,040 in Midcap Sp 400 on August 27, 2024 and sell it today you would earn a total of 523.00 from holding Midcap Sp 400 or generate 25.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Government Money vs. Midcap Sp 400
Performance |
| Timeline |
| Franklin Government Money |
| Midcap Sp 400 |
Franklin and Midcap Sp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin and Midcap Sp
The main advantage of trading using opposite Franklin and Midcap Sp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin position performs unexpectedly, Midcap Sp 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 Midcap Sp will offset losses from the drop in Midcap Sp's long position.| Franklin vs. Lord Abbett Vertible | Franklin vs. Absolute Convertible Arbitrage | Franklin vs. Harbor Vertible Securities | Franklin vs. Allianzgi Convertible Income |
| Midcap Sp vs. Pioneer Money Market | Midcap Sp vs. Dreyfus Institutional Reserves | Midcap Sp vs. Institutional Fiduciary Trust | Midcap Sp vs. Franklin Government Money |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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