Correlation Between Franklin Small and Eagle Small

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

Diversification Opportunities for Franklin Small and Eagle Small

0.98

Correlation Coefficient

Franklin Small  Eagle Small

Almost no diversification

The 3 months correlation between Franklin and Eagle is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Small Cap and Eagle Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Small 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 Eagle Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Small Cap has no effect on the direction of Franklin Small i.e., Franklin Small and Eagle Small go up and down completely randomly.

Pair Corralation between Franklin Small and Eagle Small

Assuming the 90 days horizon Franklin Small Cap is expected to generate 0.76 times more return on investment than Eagle Small. However, Franklin Small Cap is 1.32 times less risky than Eagle Small. It trades about -0.01 of its potential returns per unit of risk. Eagle Small Cap is currently generating about -0.04 per unit of risk. If you would invest  6,885  in Franklin Small Cap on September 13, 2024 and sell it today you would lose (14.00) from holding Franklin Small Cap or give up 0.2% of portfolio value over 90 days.

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

Franklin Small Cap  vs.  Eagle Small Cap

Franklin Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Small Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Franklin Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Eagle Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Small Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Eagle Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Franklin Small and Eagle Small

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

The idea behind Franklin Small Cap and Eagle Small Cap 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.