Correlation Between Franklin Emerging and Midcap Fund
Can any of the company-specific risk be diversified away by investing in both Franklin Emerging and Midcap Fund 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 Emerging and Midcap Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Emerging Market and Midcap Fund Institutional, you can compare the effects of market volatilities on Franklin Emerging and Midcap Fund 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 Emerging with a short position of Midcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Emerging and Midcap Fund.
Diversification Opportunities for Franklin Emerging and Midcap Fund
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Midcap is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Emerging Market and Midcap Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund Institutional and Franklin Emerging 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 Emerging Market are associated (or correlated) with Midcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Fund Institutional has no effect on the direction of Franklin Emerging i.e., Franklin Emerging and Midcap Fund go up and down completely randomly.
Pair Corralation between Franklin Emerging and Midcap Fund
Assuming the 90 days horizon Franklin Emerging Market is expected to generate 0.24 times more return on investment than Midcap Fund. However, Franklin Emerging Market is 4.25 times less risky than Midcap Fund. It trades about 0.49 of its potential returns per unit of risk. Midcap Fund Institutional is currently generating about 0.12 per unit of risk. If you would invest 1,187 in Franklin Emerging Market on May 27, 2025 and sell it today you would earn a total of 67.00 from holding Franklin Emerging Market or generate 5.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Emerging Market vs. Midcap Fund Institutional
Performance |
| Timeline |
| Franklin Emerging Market |
| Midcap Fund Institutional |
Franklin Emerging and Midcap Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Emerging and Midcap Fund
The main advantage of trading using opposite Franklin Emerging and Midcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Emerging position performs unexpectedly, Midcap Fund 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 Midcap Fund will offset losses from the drop in Midcap Fund's long position.The idea behind Franklin Emerging Market and Midcap Fund Institutional 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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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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