Correlation Between Clearbridge Appreciation and Franklin Small-mid
Can any of the company-specific risk be diversified away by investing in both Clearbridge Appreciation and Franklin Small-mid 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 Clearbridge Appreciation and Franklin Small-mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clearbridge Appreciation Fund and Franklin Small Mid Cap, you can compare the effects of market volatilities on Clearbridge Appreciation and Franklin Small-mid 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 Clearbridge Appreciation with a short position of Franklin Small-mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearbridge Appreciation and Franklin Small-mid.
Diversification Opportunities for Clearbridge Appreciation and Franklin Small-mid
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Clearbridge and Franklin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Appreciation Fund 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 Clearbridge Appreciation 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 Clearbridge Appreciation Fund are associated (or correlated) with Franklin Small-mid. 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 Clearbridge Appreciation i.e., Clearbridge Appreciation and Franklin Small-mid go up and down completely randomly.
Pair Corralation between Clearbridge Appreciation and Franklin Small-mid
Assuming the 90 days horizon Clearbridge Appreciation is expected to generate 1.59 times less return on investment than Franklin Small-mid. But when comparing it to its historical volatility, Clearbridge Appreciation Fund is 1.44 times less risky than Franklin Small-mid. It trades about 0.37 of its potential returns per unit of risk. Franklin Small Mid Cap is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 4,515 in Franklin Small Mid Cap on September 1, 2024 and sell it today you would earn a total of 435.00 from holding Franklin Small Mid Cap or generate 9.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Clearbridge Appreciation Fund vs. Franklin Small Mid Cap
Performance |
| Timeline |
| Clearbridge Appreciation |
| Franklin Small Mid |
Clearbridge Appreciation and Franklin Small-mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clearbridge Appreciation and Franklin Small-mid
The main advantage of trading using opposite Clearbridge Appreciation and Franklin Small-mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearbridge Appreciation position performs unexpectedly, Franklin Small-mid 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-mid will offset losses from the drop in Franklin Small-mid's long position.The idea behind Clearbridge Appreciation Fund 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.
| Franklin Small-mid vs. Franklin Mutual Beacon | Franklin Small-mid vs. Templeton Developing Markets | Franklin Small-mid vs. Franklin Mutual Global | Franklin Small-mid vs. Franklin Mutual Global |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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