Correlation Between Vanguard Small-cap and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Franklin Mutual 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 Vanguard Small-cap and Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Value and Franklin Mutual Global, you can compare the effects of market volatilities on Vanguard Small-cap and Franklin Mutual 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 Vanguard Small-cap with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Franklin Mutual.
Diversification Opportunities for Vanguard Small-cap and Franklin Mutual
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vanguard and Franklin is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Franklin Mutual Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Global and Vanguard Small-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 Vanguard Small Cap Value are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Global has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Franklin Mutual go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Franklin Mutual
Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 1.65 times more return on investment than Franklin Mutual. However, Vanguard Small-cap is 1.65 times more volatile than Franklin Mutual Global. It trades about 0.2 of its potential returns per unit of risk. Franklin Mutual Global is currently generating about 0.06 per unit of risk. If you would invest 4,527 in Vanguard Small Cap Value on September 10, 2024 and sell it today you would earn a total of 572.00 from holding Vanguard Small Cap Value or generate 12.64% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard Small Cap Value vs. Franklin Mutual Global
Performance |
Timeline |
Vanguard Small Cap |
Franklin Mutual Global |
Vanguard Small-cap and Franklin Mutual Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Small-cap and Franklin Mutual
The main advantage of trading using opposite Vanguard Small-cap and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Franklin Mutual 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 Mutual will offset losses from the drop in Franklin Mutual's long position.Vanguard Small-cap vs. California Bond Fund | Vanguard Small-cap vs. Ultra Short Fixed Income | Vanguard Small-cap vs. Ms Global Fixed | Vanguard Small-cap vs. Versatile Bond Portfolio |
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Check out your portfolio center.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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