Correlation Between Franklin Small and Franklin Balance

Can any of the company-specific risk be diversified away by investing in both Franklin Small and Franklin Balance 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 Franklin Small and Franklin Balance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Franklin Small Mid Cap and Franklin Balance Sheet, you can compare the effects of market volatilities on Franklin Small and Franklin Balance 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 Franklin Small with a short position of Franklin Balance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Small and Franklin Balance.

Diversification Opportunities for Franklin Small and Franklin Balance

0.66

Correlation Coefficient

Franklin Small  Franklin Balance

Poor diversification

The 3 months correlation between Franklin and Franklin is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Small Mid Cap and Franklin Balance Sheet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Balance Sheet and Franklin 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 Franklin Small Mid Cap are associated (or correlated) with Franklin Balance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Balance Sheet has no effect on the direction of Franklin Small i.e., Franklin Small and Franklin Balance go up and down completely randomly.

Pair Corralation between Franklin Small and Franklin Balance

Assuming the 90 days horizon Franklin Small Mid Cap is expected to generate 0.94 times more return on investment than Franklin Balance. However, Franklin Small Mid Cap is 1.07 times less risky than Franklin Balance. It trades about 0.1 of its potential returns per unit of risk. Franklin Balance Sheet is currently generating about -0.13 per unit of risk. If you would invest  3,759  in Franklin Small Mid Cap on September 22, 2024 and sell it today you would earn a total of  232.00  from holding Franklin Small Mid Cap or generate 6.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Franklin Small Mid Cap  vs.  Franklin Balance Sheet

Franklin Small Mid

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Small Mid Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Franklin Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Balance Sheet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Balance Sheet has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Franklin Small and Franklin Balance

The main advantage of trading using opposite Franklin Small and Franklin Balance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Small position performs unexpectedly, Franklin Balance 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 Balance will offset losses from the drop in Franklin Balance's long position.

The idea behind Franklin Small Mid Cap and Franklin Balance Sheet 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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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..