Correlation Between Franklin Small and Guidepath Conservative

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

Diversification Opportunities for Franklin Small and Guidepath Conservative

0.26

Correlation Coefficient

Franklin Small  Guidepath Conservative

Modest diversification

The 3 months correlation between Franklin and Guidepath is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Small Cap and Guidepath Conservative Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidepath Conservative 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 Guidepath Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidepath Conservative has no effect on the direction of Franklin Small i.e., Franklin Small and Guidepath Conservative go up and down completely randomly.

Pair Corralation between Franklin Small and Guidepath Conservative

Assuming the 90 days horizon Franklin Small Cap is expected to under-perform the Guidepath Conservative. In addition to that, Franklin Small is 10.25 times more volatile than Guidepath Conservative Income. It trades about -0.43 of its total potential returns per unit of risk. Guidepath Conservative Income is currently generating about -0.1 per unit of volatility. If you would invest  969.00  in Guidepath Conservative Income on October 11, 2024 and sell it today you would lose (3.00) from holding Guidepath Conservative Income or give up 0.31% of portfolio value over 90 days.

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

Franklin Small Cap  vs.  Guidepath Conservative Income

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 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.

Guidepath Conservative

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guidepath Conservative Income are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Guidepath Conservative 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 Small and Guidepath Conservative

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

The idea behind Franklin Small Cap and Guidepath Conservative Income 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.