Correlation Between Franklin Liberty and Vanguard Small

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

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

Diversification Opportunities for Franklin Liberty and Vanguard Small

-0.05

Correlation Coefficient

Franklin Liberty  Vanguard Small

Good diversification

The 3 months correlation between Franklin and Vanguard is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Low and Vanguard Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Franklin Liberty 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 Franklin Liberty Low are associated (or correlated) with Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Vanguard Small go up and down completely randomly.

Pair Corralation between Franklin Liberty and Vanguard Small

If you would invest  5,021  in Franklin Liberty Low on March 20, 2024 and sell it today you would earn a total of  0.00  from holding Franklin Liberty Low or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.88%
Values	Daily Returns

Franklin Liberty Low  vs.  Vanguard Small Cap Index

Franklin Liberty Low

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Small Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Vanguard Small is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Liberty and Vanguard Small

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

The idea behind Franklin Liberty Low and Vanguard Small Cap Index 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.