Correlation Between Biotechnology Portfolio and Franklin Small-mid

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

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

Diversification Opportunities for Biotechnology Portfolio and Franklin Small-mid

-0.29

Correlation Coefficient

Biotechnology Portfolio  Franklin Small-mid

Very good diversification

The 3 months correlation between Biotechnology and Franklin is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Portfolio Biotec and Franklin Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Small Mid and Biotechnology Portfolio 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 Biotechnology Portfolio Biotechnology are associated (or correlated) with Franklin Small-mid. 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 Mid has no effect on the direction of Biotechnology Portfolio i.e., Biotechnology Portfolio and Franklin Small-mid go up and down completely randomly.

Pair Corralation between Biotechnology Portfolio and Franklin Small-mid

Assuming the 90 days horizon Biotechnology Portfolio is expected to generate 3.03 times less return on investment than Franklin Small-mid. In addition to that, Biotechnology Portfolio is 1.39 times more volatile than Franklin Small Mid Cap. It trades about 0.02 of its total potential returns per unit of risk. Franklin Small Mid Cap is currently generating about 0.07 per unit of volatility. If you would invest  4,111  in Franklin Small Mid Cap on October 6, 2024 and sell it today you would earn a total of  643.00  from holding Franklin Small Mid Cap or generate 15.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Biotechnology Portfolio Biotec  vs.  Franklin Small Mid Cap

Biotechnology Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biotechnology Portfolio Biotechnology 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.

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 weak basic indicators, Franklin Small-mid may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Biotechnology Portfolio and Franklin Small-mid

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

The idea behind Biotechnology Portfolio Biotechnology and Franklin Small Mid Cap 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.