Correlation Between SCOR PK and Franklin Microcap
Can any of the company-specific risk be diversified away by investing in both SCOR PK and Franklin Microcap 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 SCOR PK and Franklin Microcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SCOR PK and Franklin Microcap Value, you can compare the effects of market volatilities on SCOR PK and Franklin Microcap 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 SCOR PK with a short position of Franklin Microcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCOR PK and Franklin Microcap.
Diversification Opportunities for SCOR PK and Franklin Microcap
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SCOR and Franklin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SCOR PK and Franklin Microcap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Microcap Value and SCOR PK 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 SCOR PK are associated (or correlated) with Franklin Microcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Microcap Value has no effect on the direction of SCOR PK i.e., SCOR PK and Franklin Microcap go up and down completely randomly.
Pair Corralation between SCOR PK and Franklin Microcap
Assuming the 90 days horizon SCOR PK is expected to generate 4.42 times less return on investment than Franklin Microcap. In addition to that, SCOR PK is 2.54 times more volatile than Franklin Microcap Value. It trades about 0.01 of its total potential returns per unit of risk. Franklin Microcap Value is currently generating about 0.11 per unit of volatility. If you would invest 2,702 in Franklin Microcap Value on September 13, 2024 and sell it today you would earn a total of 508.00 from holding Franklin Microcap Value or generate 18.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SCOR PK vs. Franklin Microcap Value
Performance |
| Timeline |
| SCOR PK |
| Franklin Microcap Value |
SCOR PK and Franklin Microcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SCOR PK and Franklin Microcap
The main advantage of trading using opposite SCOR PK and Franklin Microcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCOR PK position performs unexpectedly, Franklin Microcap 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 Microcap will offset losses from the drop in Franklin Microcap's long position.The idea behind SCOR PK and Franklin Microcap Value 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 Microcap vs. Franklin Mutual Beacon | Franklin Microcap vs. Templeton Developing Markets | Franklin Microcap vs. Franklin Mutual Global | Franklin Microcap 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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