Correlation Between Franklin Federal and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Mid Cap 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 Federal and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Federal Limited Term and Mid Cap Value Profund, you can compare the effects of market volatilities on Franklin Federal and Mid Cap 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 Federal with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Mid Cap.
Diversification Opportunities for Franklin Federal and Mid Cap
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Mid is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Limited Term and Mid Cap Value Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value and Franklin Federal 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 Federal Limited Term are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Value has no effect on the direction of Franklin Federal i.e., Franklin Federal and Mid Cap go up and down completely randomly.
Pair Corralation between Franklin Federal and Mid Cap
Assuming the 90 days horizon Franklin Federal is expected to generate 2.6 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Franklin Federal Limited Term is 10.14 times less risky than Mid Cap. It trades about 0.11 of its potential returns per unit of risk. Mid Cap Value Profund is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 7,828 in Mid Cap Value Profund on October 7, 2024 and sell it today you would earn a total of 1,086 from holding Mid Cap Value Profund or generate 13.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Federal Limited Term vs. Mid Cap Value Profund
Performance |
| Timeline |
| Franklin Federal Lim |
| Mid Cap Value |
Franklin Federal and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Mid Cap
The main advantage of trading using opposite Franklin Federal and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.| Franklin Federal vs. Touchstone Ultra Short | Franklin Federal vs. Transam Short Term Bond | Franklin Federal vs. Nuveen Short Term | Franklin Federal vs. Aamhimco Short Duration |
| Mid Cap vs. Aqr Large Cap | Mid Cap vs. Qs Large Cap | Mid Cap vs. Americafirst Large Cap | Mid Cap vs. Tax Managed Large Cap |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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