Correlation Between Ultrasmall-cap Profund and Franklin Growth
Can any of the company-specific risk be diversified away by investing in both Ultrasmall-cap Profund and Franklin Growth 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 Ultrasmall-cap Profund and Franklin Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultrasmall Cap Profund Ultrasmall Cap and Franklin Growth Fund, you can compare the effects of market volatilities on Ultrasmall-cap Profund and Franklin Growth 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 Ultrasmall-cap Profund with a short position of Franklin Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultrasmall-cap Profund and Franklin Growth.
Diversification Opportunities for Ultrasmall-cap Profund and Franklin Growth
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ultrasmall-cap and Franklin is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ultrasmall Cap Profund Ultrasm and Franklin Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Growth and Ultrasmall-cap Profund 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 Ultrasmall Cap Profund Ultrasmall Cap are associated (or correlated) with Franklin Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Growth has no effect on the direction of Ultrasmall-cap Profund i.e., Ultrasmall-cap Profund and Franklin Growth go up and down completely randomly.
Pair Corralation between Ultrasmall-cap Profund and Franklin Growth
Assuming the 90 days horizon Ultrasmall Cap Profund Ultrasmall Cap is expected to under-perform the Franklin Growth. In addition to that, Ultrasmall-cap Profund is 1.5 times more volatile than Franklin Growth Fund. It trades about -0.24 of its total potential returns per unit of risk. Franklin Growth Fund is currently generating about -0.32 per unit of volatility. If you would invest 15,066 in Franklin Growth Fund on October 9, 2024 and sell it today you would lose (1,550) from holding Franklin Growth Fund or give up 10.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultrasmall Cap Profund Ultrasm vs. Franklin Growth Fund
Performance |
| Timeline |
| Ultrasmall Cap Profund |
| Franklin Growth |
Ultrasmall-cap Profund and Franklin Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultrasmall-cap Profund and Franklin Growth
The main advantage of trading using opposite Ultrasmall-cap Profund and Franklin Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultrasmall-cap Profund position performs unexpectedly, Franklin Growth 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 Growth will offset losses from the drop in Franklin Growth's long position.The idea behind Ultrasmall Cap Profund Ultrasmall Cap and Franklin Growth Fund 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.
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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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