Correlation Between Ftfa Franklin and Vanguard Small

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

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

Diversification Opportunities for Ftfa Franklin and Vanguard Small

0.87

Correlation Coefficient

Ftfa Franklin  Vanguard Small

Very poor diversification

The 3 months correlation between Ftfa and Vanguard is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Ftfa Franklin Templeton Growth and Vanguard Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Ftfa Franklin 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 Ftfa Franklin Templeton Growth are associated (or correlated) with Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Ftfa Franklin i.e., Ftfa Franklin and Vanguard Small go up and down completely randomly.

Pair Corralation between Ftfa Franklin and Vanguard Small

Assuming the 90 days horizon Ftfa Franklin Templeton Growth is expected to generate 0.53 times more return on investment than Vanguard Small. However, Ftfa Franklin Templeton Growth is 1.89 times less risky than Vanguard Small. It trades about -0.06 of its potential returns per unit of risk. Vanguard Small Cap Growth is currently generating about -0.18 per unit of risk. If you would invest  2,112  in Ftfa Franklin Templeton Growth on September 27, 2024 and sell it today you would lose (17.00) from holding Ftfa Franklin Templeton Growth or give up 0.8% of portfolio value over 90 days.

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

Ftfa Franklin Templeton Growth  vs.  Vanguard Small Cap Growth

Ftfa Franklin Templeton

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ftfa Franklin Templeton Growth are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ftfa Franklin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ftfa Franklin and Vanguard Small

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

The idea behind Ftfa Franklin Templeton Growth and Vanguard Small Cap Growth 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.