Correlation Between Franklin Adjustable and Royce Smaller-companie

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

By analyzing existing cross correlation between Franklin Adjustable Government and Royce Smaller Companies Growth, you can compare the effects of market volatilities on Franklin Adjustable and Royce Smaller-companie 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 Adjustable with a short position of Royce Smaller-companie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Adjustable and Royce Smaller-companie.

Diversification Opportunities for Franklin Adjustable and Royce Smaller-companie

-0.65

Correlation Coefficient

Franklin Adjustable  Royce Smaller-companie

Excellent diversification

The 3 months correlation between Franklin and Royce is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Adjustable Government and Royce Smaller Companies Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Smaller Companies and Franklin Adjustable 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 Adjustable Government are associated (or correlated) with Royce Smaller-companie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Smaller Companies has no effect on the direction of Franklin Adjustable i.e., Franklin Adjustable and Royce Smaller-companie go up and down completely randomly.

Pair Corralation between Franklin Adjustable and Royce Smaller-companie

Assuming the 90 days horizon Franklin Adjustable Government is expected to generate 0.07 times more return on investment than Royce Smaller-companie. However, Franklin Adjustable Government is 13.73 times less risky than Royce Smaller-companie. It trades about 0.22 of its potential returns per unit of risk. Royce Smaller Companies Growth is currently generating about -0.07 per unit of risk. If you would invest  745.00  in Franklin Adjustable Government on December 29, 2024 and sell it today you would earn a total of  11.00  from holding Franklin Adjustable Government or generate 1.48% return on investment over 90 days.

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

Franklin Adjustable Government  vs.  Royce Smaller Companies Growth

Franklin Adjustable

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Adjustable Government are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Adjustable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Royce Smaller Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royce Smaller Companies Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical 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 Adjustable and Royce Smaller-companie

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

The idea behind Franklin Adjustable Government and Royce Smaller Companies 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.