Correlation Between Franklin Growth and Midcap Fund

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

By analyzing existing cross correlation between Franklin Growth Opportunities and Midcap Fund R 5, you can compare the effects of market volatilities on Franklin Growth and Midcap Fund 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 Growth with a short position of Midcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Growth and Midcap Fund.

Diversification Opportunities for Franklin Growth and Midcap Fund

0.71

Correlation Coefficient

Franklin Growth  Midcap Fund

Poor diversification

The 3 months correlation between Franklin and Midcap is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Growth Opportunities and Midcap Fund R 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund R and Franklin Growth 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 Growth Opportunities are associated (or correlated) with Midcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Fund R has no effect on the direction of Franklin Growth i.e., Franklin Growth and Midcap Fund go up and down completely randomly.

Pair Corralation between Franklin Growth and Midcap Fund

Assuming the 90 days horizon Franklin Growth is expected to generate 1.27 times less return on investment than Midcap Fund. In addition to that, Franklin Growth is 1.4 times more volatile than Midcap Fund R 5. It trades about 0.06 of its total potential returns per unit of risk. Midcap Fund R 5 is currently generating about 0.11 per unit of volatility. If you would invest  2,888  in Midcap Fund R 5 on December 2, 2024 and sell it today you would earn a total of  1,628  from holding Midcap Fund R 5 or generate 56.37% return on investment over 90 days.

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

Franklin Growth Opportunities  vs.  Midcap Fund R 5

Franklin Growth Oppo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Growth Opportunities 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.

Midcap Fund R

Risk-Adjusted Performance

Very Weak

Over the last 90 days Midcap Fund R 5 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Midcap Fund 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 Growth and Midcap Fund

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

The idea behind Franklin Growth Opportunities and Midcap Fund R 5 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..