Correlation Between Strategic Allocation: and Franklin Small

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

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

Diversification Opportunities for Strategic Allocation: and Franklin Small

0.82

Correlation Coefficient

Strategic Allocation:  Franklin Small

Very poor diversification

The 3 months correlation between Strategic and Franklin is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate 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 Strategic Allocation: 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 Strategic Allocation Moderate 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 Strategic Allocation: i.e., Strategic Allocation: and Franklin Small go up and down completely randomly.

Pair Corralation between Strategic Allocation: and Franklin Small

Assuming the 90 days horizon Strategic Allocation Moderate is expected to generate 0.43 times more return on investment than Franklin Small. However, Strategic Allocation Moderate is 2.31 times less risky than Franklin Small. It trades about 0.05 of its potential returns per unit of risk. Franklin Small Cap is currently generating about 0.02 per unit of risk. If you would invest  556.00  in Strategic Allocation Moderate on October 3, 2024 and sell it today you would earn a total of  83.00  from holding Strategic Allocation Moderate or generate 14.93% return on investment over 90 days.

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

Strategic Allocation Moderate  vs.  Franklin Small Cap

Strategic Allocation:

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategic Allocation Moderate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Strategic Allocation: 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

0 of 100

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 fairly strong basic indicators, Franklin Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Strategic Allocation: and Franklin Small

The main advantage of trading using opposite Strategic Allocation: and Franklin Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Allocation: 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 Strategic Allocation Moderate 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..