Correlation Between Franklin Small and Blackrock All-cap

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

By analyzing existing cross correlation between Franklin Small Cap and Blackrock All Cap Energy, you can compare the effects of market volatilities on Franklin Small and Blackrock All-cap 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 Blackrock All-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Small and Blackrock All-cap.

Diversification Opportunities for Franklin Small and Blackrock All-cap

0.46

Correlation Coefficient

Franklin Small  Blackrock All-cap

Very weak diversification

The 3 months correlation between Franklin and Blackrock is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Small Cap and Blackrock All Cap Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock All Cap 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 Cap are associated (or correlated) with Blackrock All-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock All Cap has no effect on the direction of Franklin Small i.e., Franklin Small and Blackrock All-cap go up and down completely randomly.

Pair Corralation between Franklin Small and Blackrock All-cap

Assuming the 90 days horizon Franklin Small is expected to generate 1.61 times less return on investment than Blackrock All-cap. In addition to that, Franklin Small is 1.49 times more volatile than Blackrock All Cap Energy. It trades about 0.25 of its total potential returns per unit of risk. Blackrock All Cap Energy is currently generating about 0.6 per unit of volatility. If you would invest  1,310  in Blackrock All Cap Energy on October 26, 2024 and sell it today you would earn a total of  99.00  from holding Blackrock All Cap Energy or generate 7.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Franklin Small Cap  vs.  Blackrock All Cap Energy

Franklin Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Small Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Franklin Small may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Blackrock All Cap

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock All Cap Energy are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Blackrock All-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Small and Blackrock All-cap

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

The idea behind Franklin Small Cap and Blackrock All Cap Energy 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..