Correlation Between Franklin Small and Franklin Natural
Can any of the company-specific risk be diversified away by investing in both Franklin Small and Franklin Natural 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 Small and Franklin Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Small Cap and Franklin Natural Resources, you can compare the effects of market volatilities on Franklin Small and Franklin Natural 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 Small with a short position of Franklin Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Small and Franklin Natural.
Diversification Opportunities for Franklin Small and Franklin Natural
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Franklin is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Small Cap and Franklin Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Natural Res and Franklin Small 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 Small Cap are associated (or correlated) with Franklin Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Natural Res has no effect on the direction of Franklin Small i.e., Franklin Small and Franklin Natural go up and down completely randomly.
Pair Corralation between Franklin Small and Franklin Natural
Assuming the 90 days horizon Franklin Small Cap is expected to generate 1.1 times more return on investment than Franklin Natural. However, Franklin Small is 1.1 times more volatile than Franklin Natural Resources. It trades about 0.02 of its potential returns per unit of risk. Franklin Natural Resources is currently generating about 0.02 per unit of risk. If you would invest 5,370 in Franklin Small Cap on November 2, 2024 and sell it today you would earn a total of 403.00 from holding Franklin Small Cap or generate 7.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Small Cap vs. Franklin Natural Resources
Performance |
| Timeline |
| Franklin Small Cap |
| Franklin Natural Res |
Franklin Small and Franklin Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Small and Franklin Natural
The main advantage of trading using opposite Franklin Small and Franklin Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Small position performs unexpectedly, Franklin Natural 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 Natural will offset losses from the drop in Franklin Natural's long position.| Franklin Small vs. Franklin Rising Dividends | Franklin Small vs. Franklin Mutual Global | Franklin Small vs. Franklin Mutual Shares | Franklin Small vs. Franklin Growth Fund |
| Franklin Natural vs. Artisan Select Equity | Franklin Natural vs. Doubleline Core Fixed | Franklin Natural vs. Dreyfusstandish Global Fixed | Franklin Natural vs. Ultra Short Fixed Income |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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