Correlation Between Westwood Quality and Franklin Adjustable
Can any of the company-specific risk be diversified away by investing in both Westwood Quality and Franklin Adjustable 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 Westwood Quality and Franklin Adjustable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westwood Quality Smidcap and Franklin Adjustable Government, you can compare the effects of market volatilities on Westwood Quality and Franklin Adjustable 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 Westwood Quality with a short position of Franklin Adjustable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Quality and Franklin Adjustable.
Diversification Opportunities for Westwood Quality and Franklin Adjustable
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Westwood and Franklin is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Quality Smidcap and Franklin Adjustable Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Adjustable and Westwood Quality 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 Westwood Quality Smidcap are associated (or correlated) with Franklin Adjustable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Adjustable has no effect on the direction of Westwood Quality i.e., Westwood Quality and Franklin Adjustable go up and down completely randomly.
Pair Corralation between Westwood Quality and Franklin Adjustable
Assuming the 90 days horizon Westwood Quality Smidcap is expected to generate 11.95 times more return on investment than Franklin Adjustable. However, Westwood Quality is 11.95 times more volatile than Franklin Adjustable Government. It trades about 0.17 of its potential returns per unit of risk. Franklin Adjustable Government is currently generating about 0.06 per unit of risk. If you would invest 1,652 in Westwood Quality Smidcap on August 27, 2024 and sell it today you would earn a total of 78.00 from holding Westwood Quality Smidcap or generate 4.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westwood Quality Smidcap vs. Franklin Adjustable Government
Performance |
| Timeline |
| Westwood Quality Smidcap |
| Franklin Adjustable |
Westwood Quality and Franklin Adjustable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westwood Quality and Franklin Adjustable
The main advantage of trading using opposite Westwood Quality and Franklin Adjustable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westwood Quality position performs unexpectedly, Franklin Adjustable 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 Adjustable will offset losses from the drop in Franklin Adjustable's long position.| Westwood Quality vs. Franklin Adjustable Government | Westwood Quality vs. Us Government Securities | Westwood Quality vs. Virtus Seix Government | Westwood Quality vs. John Hancock Government |
| Franklin Adjustable vs. Government Securities Fund | Franklin Adjustable vs. John Hancock Government | Franklin Adjustable vs. Short Term Government Fund | Franklin Adjustable vs. Us Government Securities |
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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