Correlation Between Health Care and Franklin Small
Can any of the company-specific risk be diversified away by investing in both Health Care 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 Health Care and Franklin Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Care Fund and Franklin Small Cap, you can compare the effects of market volatilities on Health Care 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 Health Care with a short position of Franklin Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Franklin Small.
Diversification Opportunities for Health Care and Franklin Small
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Health and Franklin is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Fund 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 Health Care 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 Health Care Fund 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 Health Care i.e., Health Care and Franklin Small go up and down completely randomly.
Pair Corralation between Health Care and Franklin Small
Assuming the 90 days horizon Health Care Fund is expected to generate 0.83 times more return on investment than Franklin Small. However, Health Care Fund is 1.21 times less risky than Franklin Small. It trades about 0.31 of its potential returns per unit of risk. Franklin Small Cap is currently generating about 0.2 per unit of risk. If you would invest 2,909 in Health Care Fund on November 7, 2024 and sell it today you would earn a total of 143.00 from holding Health Care Fund or generate 4.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Fund vs. Franklin Small Cap
Performance |
| Timeline |
| Health Care Fund |
| Franklin Small Cap |
Health Care and Franklin Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Franklin Small
The main advantage of trading using opposite Health Care and Franklin Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care 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.| Health Care vs. College Retirement Equities | Health Care vs. Calvert Moderate Allocation | Health Care vs. Retirement Living Through | Health Care vs. Dimensional Retirement Income |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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