Correlation Between Franklin Small and Stone Ridge

Can any of the company-specific risk be diversified away by investing in both Franklin Small and Stone Ridge 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 Stone Ridge 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 Stone Ridge High, you can compare the effects of market volatilities on Franklin Small and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Small and Stone Ridge.

Diversification Opportunities for Franklin Small and Stone Ridge

-0.53

Correlation Coefficient

Franklin Small  Stone Ridge

Excellent diversification

The 3 months correlation between Franklin and Stone is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Small Cap and Stone Ridge High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge High 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge High has no effect on the direction of Franklin Small i.e., Franklin Small and Stone Ridge go up and down completely randomly.

Pair Corralation between Franklin Small and Stone Ridge

Assuming the 90 days horizon Franklin Small Cap is expected to under-perform the Stone Ridge. In addition to that, Franklin Small is 9.83 times more volatile than Stone Ridge High. It trades about -0.14 of its total potential returns per unit of risk. Stone Ridge High is currently generating about 0.08 per unit of volatility. If you would invest  893.00  in Stone Ridge High on December 21, 2024 and sell it today you would earn a total of  6.00  from holding Stone Ridge High or generate 0.67% return on investment over 90 days.

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

Franklin Small Cap  vs.  Stone Ridge High

Franklin Small Cap

Risk-Adjusted Performance

Very Weak

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

Stone Ridge High

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge High are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Stone Ridge 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 Stone Ridge

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

The idea behind Franklin Small Cap and Stone Ridge High 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 Stocks Directory module to find actively traded stocks across global markets.