Correlation Between Guidemark(r) Small/mid and Franklin High

Can any of the company-specific risk be diversified away by investing in both Guidemark(r) Small/mid and Franklin High 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 Guidemark(r) Small/mid and Franklin High into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guidemark Smallmid Cap and Franklin High Yield, you can compare the effects of market volatilities on Guidemark(r) Small/mid and Franklin High 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 Guidemark(r) Small/mid with a short position of Franklin High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guidemark(r) Small/mid and Franklin High.

Diversification Opportunities for Guidemark(r) Small/mid and Franklin High

-0.35

Correlation Coefficient

Guidemark(r) Small/mid  Franklin High

Very good diversification

The 3 months correlation between Guidemark(r) and Franklin is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark Smallmid Cap and Franklin High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin High Yield and Guidemark(r) Small/mid 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 Guidemark Smallmid Cap are associated (or correlated) with Franklin High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin High Yield has no effect on the direction of Guidemark(r) Small/mid i.e., Guidemark(r) Small/mid and Franklin High go up and down completely randomly.

Pair Corralation between Guidemark(r) Small/mid and Franklin High

Assuming the 90 days horizon Guidemark Smallmid Cap is expected to under-perform the Franklin High. In addition to that, Guidemark(r) Small/mid is 4.34 times more volatile than Franklin High Yield. It trades about -0.1 of its total potential returns per unit of risk. Franklin High Yield is currently generating about -0.01 per unit of volatility. If you would invest  887.00  in Franklin High Yield on December 30, 2024 and sell it today you would lose (1.00) from holding Franklin High Yield or give up 0.11% of portfolio value over 90 days.

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

Guidemark Smallmid Cap  vs.  Franklin High Yield

Guidemark Smallmid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guidemark Smallmid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Franklin High Yield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guidemark(r) Small/mid and Franklin High

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

The idea behind Guidemark Smallmid Cap and Franklin High Yield 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.