Correlation Between Sp Smallcap and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Sp Smallcap 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 Sp Smallcap and Franklin Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp Smallcap 600 and Franklin Federal Tax Free, you can compare the effects of market volatilities on Sp Smallcap 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 Sp Smallcap with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Smallcap and Franklin Federal.
Diversification Opportunities for Sp Smallcap and Franklin Federal
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RYSVX and Franklin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sp Smallcap 600 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 Sp Smallcap 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 Sp Smallcap 600 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 Sp Smallcap i.e., Sp Smallcap and Franklin Federal go up and down completely randomly.
Pair Corralation between Sp Smallcap and Franklin Federal
Assuming the 90 days horizon Sp Smallcap 600 is expected to generate 4.27 times more return on investment than Franklin Federal. However, Sp Smallcap is 4.27 times more volatile than Franklin Federal Tax Free. It trades about 0.03 of its potential returns per unit of risk. Franklin Federal Tax Free is currently generating about -0.06 per unit of risk. If you would invest 20,802 in Sp Smallcap 600 on November 4, 2024 and sell it today you would earn a total of 97.00 from holding Sp Smallcap 600 or generate 0.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp Smallcap 600 vs. Franklin Federal Tax Free
Performance |
| Timeline |
| Sp Smallcap 600 |
| Franklin Federal Tax |
Sp Smallcap and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp Smallcap and Franklin Federal
The main advantage of trading using opposite Sp Smallcap and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Smallcap 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.| Sp Smallcap vs. Prudential High Yield | Sp Smallcap vs. Jpmorgan High Yield | Sp Smallcap vs. Simt High Yield | Sp Smallcap vs. Artisan High Income |
| 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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