Correlation Between International Equity and Franklin Small-mid
Can any of the company-specific risk be diversified away by investing in both International Equity 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 International Equity 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 International Equity Series and Franklin Small Mid Cap, you can compare the effects of market volatilities on International Equity 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 International Equity with a short position of Franklin Small-mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Franklin Small-mid.
Diversification Opportunities for International Equity and Franklin Small-mid
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and Franklin is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Series 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 International Equity 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 International Equity Series 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 International Equity i.e., International Equity and Franklin Small-mid go up and down completely randomly.
Pair Corralation between International Equity and Franklin Small-mid
Assuming the 90 days horizon International Equity Series is expected to under-perform the Franklin Small-mid. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Equity Series is 1.06 times less risky than Franklin Small-mid. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Franklin Small Mid Cap is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 4,356 in Franklin Small Mid Cap on August 25, 2024 and sell it today you would earn a total of 577.00 from holding Franklin Small Mid Cap or generate 13.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
International Equity Series vs. Franklin Small Mid Cap
Performance |
| Timeline |
| International Equity |
| Franklin Small Mid |
International Equity and Franklin Small-mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Franklin Small-mid
The main advantage of trading using opposite International Equity and Franklin Small-mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity 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.| International Equity vs. Franklin Small Mid Cap | International Equity vs. Blackrock Glbl Sm | International Equity vs. Blackrock Gbl Alloc | International Equity vs. Vanguard Explorer Fund |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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