Correlation Between Russell 2000 and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Russell 2000 and Franklin Mutual 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 Russell 2000 and Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Russell 2000 2x and Franklin Mutual Shares, you can compare the effects of market volatilities on Russell 2000 and Franklin Mutual 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 Russell 2000 with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russell 2000 and Franklin Mutual.
Diversification Opportunities for Russell 2000 and Franklin Mutual
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Russell and Franklin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Russell 2000 2x and Franklin Mutual Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Shares and Russell 2000 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 Russell 2000 2x are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Shares has no effect on the direction of Russell 2000 i.e., Russell 2000 and Franklin Mutual go up and down completely randomly.
Pair Corralation between Russell 2000 and Franklin Mutual
Assuming the 90 days horizon Russell 2000 2x is expected to generate 3.61 times more return on investment than Franklin Mutual. However, Russell 2000 is 3.61 times more volatile than Franklin Mutual Shares. It trades about 0.07 of its potential returns per unit of risk. Franklin Mutual Shares is currently generating about 0.1 per unit of risk. If you would invest 15,474 in Russell 2000 2x on September 3, 2024 and sell it today you would earn a total of 4,698 from holding Russell 2000 2x or generate 30.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Russell 2000 2x vs. Franklin Mutual Shares
Performance |
| Timeline |
| Russell 2000 2x |
| Franklin Mutual Shares |
Russell 2000 and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Russell 2000 and Franklin Mutual
The main advantage of trading using opposite Russell 2000 and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell 2000 position performs unexpectedly, Franklin Mutual 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 Mutual will offset losses from the drop in Franklin Mutual's long position.| Russell 2000 vs. William Blair Growth | Russell 2000 vs. Artisan Small Cap | Russell 2000 vs. Mid Cap Growth | Russell 2000 vs. Pace Smallmedium Growth |
| Franklin Mutual vs. Franklin Mutual Quest | Franklin Mutual vs. Franklin Mutual Global | Franklin Mutual vs. Franklin Mutual Beacon | Franklin Mutual vs. Franklin Mutual European |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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