Correlation Between Franklin Government and Westwood Smidcap
Can any of the company-specific risk be diversified away by investing in both Franklin Government and Westwood Smidcap 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 Government and Westwood Smidcap 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 Westwood Smidcap Fund, you can compare the effects of market volatilities on Franklin Government and Westwood Smidcap 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 Government with a short position of Westwood Smidcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Government and Westwood Smidcap.
Diversification Opportunities for Franklin Government and Westwood Smidcap
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Westwood is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Westwood Smidcap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Smidcap and Franklin Government 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 Westwood Smidcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Smidcap has no effect on the direction of Franklin Government i.e., Franklin Government and Westwood Smidcap go up and down completely randomly.
Pair Corralation between Franklin Government and Westwood Smidcap
Assuming the 90 days horizon Franklin Government is expected to generate 7.16 times less return on investment than Westwood Smidcap. But when comparing it to its historical volatility, Franklin Government Money is 8.88 times less risky than Westwood Smidcap. It trades about 0.13 of its potential returns per unit of risk. Westwood Smidcap Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,478 in Westwood Smidcap Fund on September 12, 2024 and sell it today you would earn a total of 218.00 from holding Westwood Smidcap Fund or generate 14.75% 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. Westwood Smidcap Fund
Performance |
| Timeline |
| Franklin Government Money |
| Westwood Smidcap |
Franklin Government and Westwood Smidcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Government and Westwood Smidcap
The main advantage of trading using opposite Franklin Government and Westwood Smidcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Government position performs unexpectedly, Westwood Smidcap 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 Westwood Smidcap will offset losses from the drop in Westwood Smidcap's long position.| Franklin Government vs. Buffalo High Yield | Franklin Government vs. Fidelity Capital Income | Franklin Government vs. T Rowe Price | Franklin Government vs. Prudential High Yield |
| Westwood Smidcap vs. Dreyfusstandish Global Fixed | Westwood Smidcap vs. Dws Government Money | Westwood Smidcap vs. Multisector Bond Sma | Westwood Smidcap vs. Bbh Intermediate Municipal |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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