Correlation Between Needham Small and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Needham Small and Franklin Federal 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 Federal 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 Federal Tax Free, you can compare the effects of market volatilities on Needham Small and Franklin Federal 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 Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Needham Small and Franklin Federal.
Diversification Opportunities for Needham Small and Franklin Federal
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Needham and Franklin is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Needham Small Cap and Franklin Federal Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Federal Tax 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 Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Federal Tax has no effect on the direction of Needham Small i.e., Needham Small and Franklin Federal go up and down completely randomly.
Pair Corralation between Needham Small and Franklin Federal
Assuming the 90 days horizon Needham Small Cap is expected to under-perform the Franklin Federal. In addition to that, Needham Small is 7.27 times more volatile than Franklin Federal Tax Free. It trades about -0.03 of its total potential returns per unit of risk. Franklin Federal Tax Free is currently generating about -0.06 per unit of volatility. If you would invest 1,083 in Franklin Federal Tax Free on November 4, 2024 and sell it today you would lose (3.00) from holding Franklin Federal Tax Free or give up 0.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Needham Small Cap vs. Franklin Federal Tax Free
Performance |
| Timeline |
| Needham Small Cap |
| Franklin Federal Tax |
Needham Small and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Needham Small and Franklin Federal
The main advantage of trading using opposite Needham Small and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Needham Small position performs unexpectedly, Franklin Federal 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 Federal will offset losses from the drop in Franklin Federal'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 Federal vs. Blackrock Financial Institutions | Franklin Federal vs. Fidelity Advisor Financial | Franklin Federal vs. Mesirow Financial Small | Franklin Federal vs. Blackstone Secured Lending |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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