Correlation Between XRP and Franklin Small

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

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

Diversification Opportunities for XRP and Franklin Small

0.65

Correlation Coefficient

XRP  Franklin Small

Poor diversification

The 3 months correlation between XRP and Franklin is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding XRP 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 XRP 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 XRP 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 XRP i.e., XRP and Franklin Small go up and down completely randomly.

Pair Corralation between XRP and Franklin Small

Assuming the 90 days trading horizon XRP is expected to generate 5.71 times more return on investment than Franklin Small. However, XRP is 5.71 times more volatile than Franklin Small Cap. It trades about 0.11 of its potential returns per unit of risk. Franklin Small Cap is currently generating about 0.06 per unit of risk. If you would invest  41.00  in XRP on October 10, 2024 and sell it today you would earn a total of  189.00  from holding XRP or generate 460.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	60.08%
Values	Daily Returns

XRP  vs.  Franklin Small Cap

XRP

Risk-Adjusted Performance

26 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, XRP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Franklin Small Cap

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with XRP and Franklin Small

The main advantage of trading using opposite XRP and Franklin Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XRP 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 XRP 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.