Correlation Between Mesirow Financial and Franklin Balance

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

By analyzing existing cross correlation between Mesirow Financial Small and Franklin Balance Sheet, you can compare the effects of market volatilities on Mesirow Financial and Franklin Balance 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 Mesirow Financial with a short position of Franklin Balance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mesirow Financial and Franklin Balance.

Diversification Opportunities for Mesirow Financial and Franklin Balance

0.93

Correlation Coefficient

Mesirow Financial  Franklin Balance

Almost no diversification

The 3 months correlation between Mesirow and Franklin is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Mesirow Financial Small and Franklin Balance Sheet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Balance Sheet and Mesirow Financial 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 Mesirow Financial Small are associated (or correlated) with Franklin Balance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Balance Sheet has no effect on the direction of Mesirow Financial i.e., Mesirow Financial and Franklin Balance go up and down completely randomly.

Pair Corralation between Mesirow Financial and Franklin Balance

Assuming the 90 days horizon Mesirow Financial Small is expected to under-perform the Franklin Balance. In addition to that, Mesirow Financial is 2.27 times more volatile than Franklin Balance Sheet. It trades about -0.22 of its total potential returns per unit of risk. Franklin Balance Sheet is currently generating about -0.39 per unit of volatility. If you would invest  4,007  in Franklin Balance Sheet on October 11, 2024 and sell it today you would lose (346.00) from holding Franklin Balance Sheet or give up 8.63% of portfolio value over 90 days.

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

Mesirow Financial Small  vs.  Franklin Balance Sheet

Mesirow Financial Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

Franklin Balance Sheet

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mesirow Financial and Franklin Balance

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

The idea behind Mesirow Financial Small and Franklin Balance Sheet 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.