Correlation Between Vanguard Small and Franklin Small
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Franklin Small 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 Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Value and Franklin Small Cap, you can compare the effects of market volatilities on Vanguard Small and Franklin Small 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 Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Franklin Small.
Diversification Opportunities for Vanguard Small and Franklin Small
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Franklin is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Franklin Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Small Cap 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 Value are associated (or correlated) with Franklin Small. 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 Cap has no effect on the direction of Vanguard Small i.e., Vanguard Small and Franklin Small go up and down completely randomly.
Pair Corralation between Vanguard Small and Franklin Small
Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 0.9 times more return on investment than Franklin Small. However, Vanguard Small Cap Value is 1.11 times less risky than Franklin Small. It trades about -0.09 of its potential returns per unit of risk. Franklin Small Cap is currently generating about -0.13 per unit of risk. If you would invest 5,127 in Vanguard Small Cap Value on September 12, 2024 and sell it today you would lose (77.00) from holding Vanguard Small Cap Value or give up 1.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. Franklin Small Cap
Performance |
| Timeline |
| Vanguard Small Cap |
| Franklin Small Cap |
Vanguard Small and Franklin Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Franklin Small
The main advantage of trading using opposite Vanguard Small and Franklin Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Franklin Small 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 will offset losses from the drop in Franklin Small's long position.| Vanguard Small vs. Jp Morgan Smartretirement | Vanguard Small vs. Sa Worldwide Moderate | Vanguard Small vs. Fidelity Managed Retirement | Vanguard Small vs. Qs Moderate Growth |
| Franklin Small vs. Vanguard Small Cap Value | Franklin Small vs. SCOR PK | Franklin Small vs. Morningstar Unconstrained Allocation | Franklin Small vs. Thrivent High Yield |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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