Correlation Between Pioneer Mid and Franklin Small

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

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

Diversification Opportunities for Pioneer Mid and Franklin Small

0.77

Correlation Coefficient

Pioneer Mid  Franklin Small

Poor diversification

The 3 months correlation between Pioneer and Franklin is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Mid Cap and Franklin Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Small Cap and Pioneer 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 Pioneer Mid Cap are associated (or correlated) with Franklin Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Small Cap has no effect on the direction of Pioneer Mid i.e., Pioneer Mid and Franklin Small go up and down completely randomly.

Pair Corralation between Pioneer Mid and Franklin Small

Assuming the 90 days horizon Pioneer Mid Cap is expected to generate 0.63 times more return on investment than Franklin Small. However, Pioneer Mid Cap is 1.59 times less risky than Franklin Small. It trades about -0.02 of its potential returns per unit of risk. Franklin Small Cap is currently generating about -0.14 per unit of risk. If you would invest  2,653  in Pioneer Mid Cap on December 30, 2024 and sell it today you would lose (35.00) from holding Pioneer Mid Cap or give up 1.32% of portfolio value over 90 days.

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

Pioneer Mid Cap  vs.  Franklin Small Cap

Pioneer Mid Cap

Risk-Adjusted Performance

Very Weak

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

Franklin Small Cap

Risk-Adjusted Performance

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.

Pair Trading with Pioneer Mid and Franklin Small

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

The idea behind Pioneer Mid Cap and Franklin Small Cap 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.