Correlation Between Tax-managed and Franklin Small
Can any of the company-specific risk be diversified away by investing in both Tax-managed 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 Tax-managed and Franklin Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Managed Mid Small and Franklin Small Cap, you can compare the effects of market volatilities on Tax-managed 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 Tax-managed with a short position of Franklin Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed and Franklin Small.
Diversification Opportunities for Tax-managed and Franklin Small
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tax-managed and Franklin is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Mid Small and Franklin Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Small Cap and Tax-managed 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 Tax Managed Mid Small 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 Cap has no effect on the direction of Tax-managed i.e., Tax-managed and Franklin Small go up and down completely randomly.
Pair Corralation between Tax-managed and Franklin Small
Assuming the 90 days horizon Tax-managed is expected to generate 1.91 times less return on investment than Franklin Small. But when comparing it to its historical volatility, Tax Managed Mid Small is 1.07 times less risky than Franklin Small. It trades about 0.13 of its potential returns per unit of risk. Franklin Small Cap is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,587 in Franklin Small Cap on October 19, 2024 and sell it today you would earn a total of 64.00 from holding Franklin Small Cap or generate 4.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tax Managed Mid Small vs. Franklin Small Cap
Performance |
| Timeline |
| Tax Managed Mid |
| Franklin Small Cap |
Tax-managed and Franklin Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax-managed and Franklin Small
The main advantage of trading using opposite Tax-managed and Franklin Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax-managed 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.| Tax-managed vs. Brown Advisory Small Cap | Tax-managed vs. Small Cap Stock | Tax-managed vs. Dreyfus Smallcap Stock | Tax-managed vs. Royce Premier Fund |
| Franklin Small vs. Hunter Small Cap | Franklin Small vs. Tax Managed Mid Small | Franklin Small vs. Sp Smallcap 600 | Franklin Small vs. Needham Small 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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