Correlation Between Franklin Strategic and Franklin Microcap
Can any of the company-specific risk be diversified away by investing in both Franklin Strategic and Franklin Microcap 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 Strategic and Franklin Microcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Strategic Income and Franklin Microcap Value, you can compare the effects of market volatilities on Franklin Strategic and Franklin Microcap 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 Strategic with a short position of Franklin Microcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Strategic and Franklin Microcap.
Diversification Opportunities for Franklin Strategic and Franklin Microcap
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Franklin is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Strategic Income and Franklin Microcap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Microcap Value and Franklin Strategic 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 Strategic Income are associated (or correlated) with Franklin Microcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Microcap Value has no effect on the direction of Franklin Strategic i.e., Franklin Strategic and Franklin Microcap go up and down completely randomly.
Pair Corralation between Franklin Strategic and Franklin Microcap
Assuming the 90 days horizon Franklin Strategic Income is expected to generate 0.25 times more return on investment than Franklin Microcap. However, Franklin Strategic Income is 3.92 times less risky than Franklin Microcap. It trades about 0.21 of its potential returns per unit of risk. Franklin Microcap Value is currently generating about -0.15 per unit of risk. If you would invest 821.00 in Franklin Strategic Income on November 28, 2024 and sell it today you would earn a total of 9.00 from holding Franklin Strategic Income or generate 1.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Strategic Income vs. Franklin Microcap Value
Performance |
| Timeline |
| Franklin Strategic Income |
| Franklin Microcap Value |
Franklin Strategic and Franklin Microcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Strategic and Franklin Microcap
The main advantage of trading using opposite Franklin Strategic and Franklin Microcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Strategic position performs unexpectedly, Franklin Microcap 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 Franklin Microcap will offset losses from the drop in Franklin Microcap's long position.| Franklin Strategic vs. M Large Cap | Franklin Strategic vs. Tax Managed Large Cap | Franklin Strategic vs. Guidemark Large Cap | Franklin Strategic vs. Fidelity Large Cap |
| Franklin Microcap vs. Arrow Managed Futures | Franklin Microcap vs. Fabwx | Franklin Microcap vs. Aam Select Income | Franklin Microcap vs. Fbanjx |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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