Correlation Between Mid Cap and Franklin Servative

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

By analyzing existing cross correlation between Mid Cap 15x Strategy and Franklin Servative Allocation, you can compare the effects of market volatilities on Mid Cap and Franklin Servative 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 Mid Cap with a short position of Franklin Servative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Franklin Servative.

Diversification Opportunities for Mid Cap and Franklin Servative

0.85

Correlation Coefficient

Mid Cap  Franklin Servative

Very poor diversification

The 3 months correlation between Mid and Franklin is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and Franklin Servative Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Servative and Mid Cap 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 Mid Cap 15x Strategy are associated (or correlated) with Franklin Servative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Servative has no effect on the direction of Mid Cap i.e., Mid Cap and Franklin Servative go up and down completely randomly.

Pair Corralation between Mid Cap and Franklin Servative

Assuming the 90 days horizon Mid Cap 15x Strategy is expected to generate 3.65 times more return on investment than Franklin Servative. However, Mid Cap is 3.65 times more volatile than Franklin Servative Allocation. It trades about 0.07 of its potential returns per unit of risk. Franklin Servative Allocation is currently generating about 0.08 per unit of risk. If you would invest  11,401  in Mid Cap 15x Strategy on October 24, 2024 and sell it today you would earn a total of  2,826  from holding Mid Cap 15x Strategy or generate 24.79% return on investment over 90 days.

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

Mid Cap 15x Strategy  vs.  Franklin Servative Allocation

Mid Cap 15x

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap 15x Strategy are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Mid Cap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Franklin Servative

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Servative Allocation are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Servative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mid Cap and Franklin Servative

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

The idea behind Mid Cap 15x Strategy and Franklin Servative Allocation 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.