Correlation Between Franklin Small and Kinetics Market

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

Diversification Opportunities for Franklin Small and Kinetics Market

0.84

Correlation Coefficient

Franklin Small  Kinetics Market

Very poor diversification

The 3 months correlation between Franklin and Kinetics is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Small Cap and Kinetics Market Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Market Oppo 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 Kinetics Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Market Oppo has no effect on the direction of Franklin Small i.e., Franklin Small and Kinetics Market go up and down completely randomly.

Pair Corralation between Franklin Small and Kinetics Market

Assuming the 90 days horizon Franklin Small Cap is expected to generate 0.55 times more return on investment than Kinetics Market. However, Franklin Small Cap is 1.82 times less risky than Kinetics Market. It trades about -0.54 of its potential returns per unit of risk. Kinetics Market Opportunities is currently generating about -0.39 per unit of risk. If you would invest  7,060  in Franklin Small Cap on September 25, 2024 and sell it today you would lose (1,032) from holding Franklin Small Cap or give up 14.62% of portfolio value over 90 days.

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

Franklin Small Cap  vs.  Kinetics Market Opportunities

Franklin Small Cap

Risk-Adjusted Performance

0 of 100

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 fairly strong basic indicators, Franklin Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kinetics Market Oppo

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Market Opportunities are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Kinetics Market showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin Small and Kinetics Market

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

The idea behind Franklin Small Cap and Kinetics Market Opportunities 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.