Correlation Between Needham Small and Franklin High
Can any of the company-specific risk be diversified away by investing in both Needham Small and Franklin High 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 Needham Small and Franklin High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Needham Small Cap and Franklin High Yield, you can compare the effects of market volatilities on Needham Small and Franklin High 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 Needham Small with a short position of Franklin High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Small and Franklin High.
Diversification Opportunities for Needham Small and Franklin High
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Needham and Franklin is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Franklin High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin High Yield and Needham 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 Needham Small Cap are associated (or correlated) with Franklin High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin High Yield has no effect on the direction of Needham Small i.e., Needham Small and Franklin High go up and down completely randomly.
Pair Corralation between Needham Small and Franklin High
Assuming the 90 days horizon Needham Small Cap is expected to under-perform the Franklin High. In addition to that, Needham Small is 6.97 times more volatile than Franklin High Yield. It trades about -0.1 of its total potential returns per unit of risk. Franklin High Yield is currently generating about 0.05 per unit of volatility. If you would invest 899.00 in Franklin High Yield on November 7, 2024 and sell it today you would earn a total of 2.00 from holding Franklin High Yield or generate 0.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Needham Small Cap vs. Franklin High Yield
Performance |
| Timeline |
| Needham Small Cap |
| Franklin High Yield |
Needham Small and Franklin High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Needham Small and Franklin High
The main advantage of trading using opposite Needham Small and Franklin High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Small position performs unexpectedly, Franklin High 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 High will offset losses from the drop in Franklin High's long position.| Needham Small vs. Needham Aggressive Growth | Needham Small vs. Needham Growth Fund | Needham Small vs. Baron Opportunity Fund | Needham Small vs. Jacob Micro Cap |
| Franklin High vs. Payden Government Fund | Franklin High vs. Hsbc Government Money | Franklin High vs. Franklin Adjustable Government | Franklin High vs. Davis Government Bond |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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