Correlation Between Vanguard Small and Franklin FTSE
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Franklin FTSE 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 Vanguard Small and Franklin FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and Franklin FTSE United, you can compare the effects of market volatilities on Vanguard Small and Franklin FTSE 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 Vanguard Small with a short position of Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Franklin FTSE.
Diversification Opportunities for Vanguard Small and Franklin FTSE
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Franklin is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Franklin FTSE United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE United and Vanguard 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 Vanguard Small Cap Index are associated (or correlated) with Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE United has no effect on the direction of Vanguard Small i.e., Vanguard Small and Franklin FTSE go up and down completely randomly.
Pair Corralation between Vanguard Small and Franklin FTSE
Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 1.4 times more return on investment than Franklin FTSE. However, Vanguard Small is 1.4 times more volatile than Franklin FTSE United. It trades about 0.12 of its potential returns per unit of risk. Franklin FTSE United is currently generating about 0.01 per unit of risk. If you would invest 22,077 in Vanguard Small Cap Index on August 29, 2024 and sell it today you would earn a total of 3,914 from holding Vanguard Small Cap Index or generate 17.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Franklin FTSE United
Performance |
| Timeline |
| Vanguard Small Cap |
| Franklin FTSE United |
Vanguard Small and Franklin FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Franklin FTSE
The main advantage of trading using opposite Vanguard Small and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Franklin FTSE 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 FTSE will offset losses from the drop in Franklin FTSE's long position.| Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Small Cap Value | Vanguard Small vs. Vanguard FTSE Emerging | Vanguard Small vs. Vanguard Large Cap Index |
| Franklin FTSE vs. iShares MSCI Hong | Franklin FTSE vs. HUMANA INC | Franklin FTSE vs. SCOR PK | Franklin FTSE vs. Aquagold International |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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