Correlation Between Jennison Natural and Franklin Small
Can any of the company-specific risk be diversified away by investing in both Jennison Natural and Franklin Small 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 Jennison Natural and Franklin Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jennison Natural Resources and Franklin Small Mid Cap, you can compare the effects of market volatilities on Jennison Natural and Franklin Small 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 Jennison Natural with a short position of Franklin Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jennison Natural and Franklin Small.
Diversification Opportunities for Jennison Natural and Franklin Small
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Jennison and Franklin is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Jennison Natural Resources and Franklin Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Small Mid and Jennison Natural 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 Jennison Natural Resources are associated (or correlated) with Franklin Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Small Mid has no effect on the direction of Jennison Natural i.e., Jennison Natural and Franklin Small go up and down completely randomly.
Pair Corralation between Jennison Natural and Franklin Small
Assuming the 90 days horizon Jennison Natural Resources is expected to under-perform the Franklin Small. In addition to that, Jennison Natural is 1.01 times more volatile than Franklin Small Mid Cap. It trades about -0.29 of its total potential returns per unit of risk. Franklin Small Mid Cap is currently generating about -0.15 per unit of volatility. If you would invest 4,968 in Franklin Small Mid Cap on September 27, 2024 and sell it today you would lose (192.00) from holding Franklin Small Mid Cap or give up 3.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jennison Natural Resources vs. Franklin Small Mid Cap
Performance |
| Timeline |
| Jennison Natural Res |
| Franklin Small Mid |
Jennison Natural and Franklin Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jennison Natural and Franklin Small
The main advantage of trading using opposite Jennison Natural and Franklin Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jennison Natural position performs unexpectedly, Franklin Small 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 Small will offset losses from the drop in Franklin Small's long position.The idea behind Jennison Natural Resources and Franklin Small Mid Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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