Correlation Between SPDR SP and Franklin Core

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

By analyzing existing cross correlation between SPDR SP 500 and Franklin Core Dividend, you can compare the effects of market volatilities on SPDR SP and Franklin Core 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 SPDR SP with a short position of Franklin Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Franklin Core.

Diversification Opportunities for SPDR SP and Franklin Core

0.81

Correlation Coefficient

SPDR SP  Franklin Core

Very poor diversification

The 3 months correlation between SPDR and Franklin is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Franklin Core Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Core Dividend and SPDR SP 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 SPDR SP 500 are associated (or correlated) with Franklin Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Core Dividend has no effect on the direction of SPDR SP i.e., SPDR SP and Franklin Core go up and down completely randomly.

Pair Corralation between SPDR SP and Franklin Core

Considering the 90-day investment horizon SPDR SP 500 is expected to under-perform the Franklin Core. In addition to that, SPDR SP is 1.03 times more volatile than Franklin Core Dividend. It trades about -0.08 of its total potential returns per unit of risk. Franklin Core Dividend is currently generating about -0.07 per unit of volatility. If you would invest  4,543  in Franklin Core Dividend on December 28, 2024 and sell it today you would lose (196.68) from holding Franklin Core Dividend or give up 4.33% of portfolio value over 90 days.

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

SPDR SP 500  vs.  Franklin Core Dividend

SPDR SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Core Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Core Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Franklin Core is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SPDR SP and Franklin Core

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

The idea behind SPDR SP 500 and Franklin Core Dividend 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.