Correlation Between SPDR Russell and Franklin Strategic

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

By analyzing existing cross correlation between SPDR Russell 1000 and Franklin Strategic Mortgage, you can compare the effects of market volatilities on SPDR Russell and Franklin Strategic 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 Russell with a short position of Franklin Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Russell and Franklin Strategic.

Diversification Opportunities for SPDR Russell and Franklin Strategic

-0.05

Correlation Coefficient

SPDR Russell  Franklin Strategic

Good diversification

The 3 months correlation between SPDR and Franklin is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Russell 1000 and Franklin Strategic Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Strategic and SPDR Russell 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 Russell 1000 are associated (or correlated) with Franklin Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Strategic has no effect on the direction of SPDR Russell i.e., SPDR Russell and Franklin Strategic go up and down completely randomly.

Pair Corralation between SPDR Russell and Franklin Strategic

Given the investment horizon of 90 days SPDR Russell 1000 is expected to generate 1.6 times more return on investment than Franklin Strategic. However, SPDR Russell is 1.6 times more volatile than Franklin Strategic Mortgage. It trades about 0.08 of its potential returns per unit of risk. Franklin Strategic Mortgage is currently generating about -0.02 per unit of risk. If you would invest  9,532  in SPDR Russell 1000 on January 24, 2024 and sell it today you would earn a total of  1,248  from holding SPDR Russell 1000 or generate 13.09% return on investment over 90 days.

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

SPDR Russell 1000  vs.  Franklin Strategic Mortgage

SPDR Russell 1000

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Russell 1000 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, SPDR Russell is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Franklin Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Strategic Mortgage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Franklin Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR Russell and Franklin Strategic

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

The idea behind SPDR Russell 1000 and Franklin Strategic Mortgage 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.