Correlation Between Western Asset and Franklin Small
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Franklin Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset E and Franklin Small Cap, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Franklin Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Franklin Small.
Diversification Opportunities for Western Asset and Franklin Small
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and Franklin is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset E 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 Western Asset 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 Western Asset E 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 Western Asset i.e., Western Asset and Franklin Small go up and down completely randomly.
Pair Corralation between Western Asset and Franklin Small
Assuming the 90 days horizon Western Asset E is expected to under-perform the Franklin Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Western Asset E is 4.38 times less risky than Franklin Small. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Franklin Small Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5,988 in Franklin Small Cap on August 25, 2024 and sell it today you would earn a total of 478.00 from holding Franklin Small Cap or generate 7.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset E vs. Franklin Small Cap
Performance |
| Timeline |
| Western Asset E |
| Franklin Small Cap |
Western Asset and Franklin Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Franklin Small
The main advantage of trading using opposite Western Asset and Franklin Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. Franklin Mutual Beacon | Western Asset vs. Templeton Developing Markets | Western Asset vs. Franklin Mutual Global | Western Asset vs. Franklin Mutual Global |
| Franklin Small vs. Franklin Rising Dividends | Franklin Small vs. Franklin Mutual Global | Franklin Small vs. Franklin Mutual Shares | Franklin Small vs. Franklin Growth Fund |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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