Correlation Between Franklin International and Invesco SP

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

By analyzing existing cross correlation between Franklin International Low and Invesco SP SmallCap, you can compare the effects of market volatilities on Franklin International and Invesco SP 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 International with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin International and Invesco SP.

Diversification Opportunities for Franklin International and Invesco SP

-0.48

Correlation Coefficient

Franklin International  Invesco SP

Very good diversification

The 3 months correlation between Franklin and Invesco is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Franklin International Low and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap and Franklin International 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 International Low are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of Franklin International i.e., Franklin International and Invesco SP go up and down completely randomly.

Pair Corralation between Franklin International and Invesco SP

Given the investment horizon of 90 days Franklin International Low is expected to generate 0.58 times more return on investment than Invesco SP. However, Franklin International Low is 1.72 times less risky than Invesco SP. It trades about 0.23 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about -0.03 per unit of risk. If you would invest  3,021  in Franklin International Low on December 29, 2024 and sell it today you would earn a total of  232.00  from holding Franklin International Low or generate 7.68% return on investment over 90 days.

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

Franklin International Low  vs.  Invesco SP SmallCap

Franklin International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin International Low are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, Franklin International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Invesco SP SmallCap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP SmallCap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Invesco SP is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Franklin International and Invesco SP

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

The idea behind Franklin International Low and Invesco SP SmallCap 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.