Correlation Between Touchstone Small and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Touchstone Small 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 Touchstone Small and Franklin Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Touchstone Small Cap and Franklin Federal Tax Free, you can compare the effects of market volatilities on Touchstone Small 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 Touchstone Small with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and Franklin Federal.
Diversification Opportunities for Touchstone Small and Franklin Federal
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Touchstone and Franklin is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap 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 Touchstone Small 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 Touchstone Small Cap 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 Touchstone Small i.e., Touchstone Small and Franklin Federal go up and down completely randomly.
Pair Corralation between Touchstone Small and Franklin Federal
Assuming the 90 days horizon Touchstone Small Cap is expected to generate 3.92 times more return on investment than Franklin Federal. However, Touchstone Small is 3.92 times more volatile than Franklin Federal Tax Free. It trades about 0.17 of its potential returns per unit of risk. Franklin Federal Tax Free is currently generating about 0.07 per unit of risk. If you would invest 3,850 in Touchstone Small Cap on October 25, 2024 and sell it today you would earn a total of 117.00 from holding Touchstone Small Cap or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Touchstone Small Cap vs. Franklin Federal Tax Free
Performance |
| Timeline |
| Touchstone Small Cap |
| Franklin Federal Tax |
Touchstone Small and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Small and Franklin Federal
The main advantage of trading using opposite Touchstone Small and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small 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.| Touchstone Small vs. Deutsche Gold Precious | Touchstone Small vs. James Balanced Golden | Touchstone Small vs. Sprott Gold Equity | Touchstone Small vs. First Eagle Gold |
| Franklin Federal vs. Sp Smallcap 600 | Franklin Federal vs. Touchstone Small Cap | Franklin Federal vs. Praxis Small Cap | Franklin Federal vs. Needham Small Cap |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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