Correlation Between Franklin Moderate and Sit U
Can any of the company-specific risk be diversified away by investing in both Franklin Moderate and Sit U 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 Moderate and Sit U into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Moderate Allocation and Sit U S, you can compare the effects of market volatilities on Franklin Moderate and Sit U 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 Moderate with a short position of Sit U. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Moderate and Sit U.
Diversification Opportunities for Franklin Moderate and Sit U
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Sit is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Moderate Allocation and Sit U S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit U S and Franklin Moderate 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 Moderate Allocation are associated (or correlated) with Sit U. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit U S has no effect on the direction of Franklin Moderate i.e., Franklin Moderate and Sit U go up and down completely randomly.
Pair Corralation between Franklin Moderate and Sit U
Assuming the 90 days horizon Franklin Moderate Allocation is expected to generate 2.68 times more return on investment than Sit U. However, Franklin Moderate is 2.68 times more volatile than Sit U S. It trades about 0.16 of its potential returns per unit of risk. Sit U S is currently generating about 0.15 per unit of risk. If you would invest 1,634 in Franklin Moderate Allocation on September 1, 2025 and sell it today you would earn a total of 80.00 from holding Franklin Moderate Allocation or generate 4.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Moderate Allocation vs. Sit U S
Performance |
| Timeline |
| Franklin Moderate |
| Sit U S |
Franklin Moderate and Sit U Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Moderate and Sit U
The main advantage of trading using opposite Franklin Moderate and Sit U positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Moderate position performs unexpectedly, Sit U 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 Sit U will offset losses from the drop in Sit U's long position.The idea behind Franklin Moderate Allocation and Sit U S 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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