Correlation Between Franklin International and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Franklin International and Invesco SP 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 International and Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin International Low and Invesco SP SmallCap, you can compare the effects of market volatilities on Franklin International and Invesco SP 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 International with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin International and Invesco SP.
Diversification Opportunities for Franklin International and Invesco SP
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Franklin and Invesco is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Franklin International Low and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap and Franklin International 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 International Low are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of Franklin International i.e., Franklin International and Invesco SP go up and down completely randomly.
Pair Corralation between Franklin International and Invesco SP
Given the investment horizon of 90 days Franklin International is expected to generate 7.07 times less return on investment than Invesco SP. But when comparing it to its historical volatility, Franklin International Low is 2.0 times less risky than Invesco SP. It trades about 0.08 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,460 in Invesco SP SmallCap on September 1, 2024 and sell it today you would earn a total of 101.00 from holding Invesco SP SmallCap or generate 6.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin International Low vs. Invesco SP SmallCap
Performance |
| Timeline |
| Franklin International |
| Invesco SP SmallCap |
Franklin International and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin International and Invesco SP
The main advantage of trading using opposite Franklin International and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin International position performs unexpectedly, Invesco SP 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 Invesco SP will offset losses from the drop in Invesco SP's long position.| Franklin International vs. Legg Mason Low | Franklin International vs. Xtrackers MSCI EAFE | Franklin International vs. Invesco SP SmallCap | Franklin International vs. WisdomTree International Hedged |
| Invesco SP vs. Vanguard Small Cap Value | Invesco SP vs. Dimensional Targeted Value | Invesco SP vs. iShares SP Small Cap | Invesco SP vs. SPDR SP 600 |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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