Correlation Between Franklin and Russell 2000
Can any of the company-specific risk be diversified away by investing in both Franklin and Russell 2000 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 Russell 2000 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 Russell 2000 2x, you can compare the effects of market volatilities on Franklin and Russell 2000 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 Russell 2000. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin and Russell 2000.
Diversification Opportunities for Franklin and Russell 2000
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Russell is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Russell 2000 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell 2000 2x 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 Russell 2000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell 2000 2x has no effect on the direction of Franklin i.e., Franklin and Russell 2000 go up and down completely randomly.
Pair Corralation between Franklin and Russell 2000
If you would invest 16,401 in Russell 2000 2x on September 1, 2024 and sell it today you would earn a total of 3,435 from holding Russell 2000 2x or generate 20.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Government Money vs. Russell 2000 2x
Performance |
| Timeline |
| Franklin Government Money |
| Russell 2000 2x |
Franklin and Russell 2000 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin and Russell 2000
The main advantage of trading using opposite Franklin and Russell 2000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin position performs unexpectedly, Russell 2000 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 Russell 2000 will offset losses from the drop in Russell 2000's long position.| Franklin vs. Touchstone Small Cap | Franklin vs. Chase Growth Fund | Franklin vs. Champlain Mid Cap | Franklin vs. Rational Defensive Growth |
| Russell 2000 vs. Us Government Securities | Russell 2000 vs. Short Term Government Fund | Russell 2000 vs. Franklin Government Money | Russell 2000 vs. Inverse Government Long |
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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