Correlation Between Microsoft and Franklin Templeton
Can any of the company-specific risk be diversified away by investing in both Microsoft and Franklin Templeton 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 Microsoft and Franklin Templeton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Franklin Templeton Smacs, you can compare the effects of market volatilities on Microsoft and Franklin Templeton 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 Microsoft with a short position of Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Franklin Templeton.
Diversification Opportunities for Microsoft and Franklin Templeton
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Microsoft and Franklin is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Franklin Templeton Smacs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton Smacs and Microsoft 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 Microsoft are associated (or correlated) with Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton Smacs has no effect on the direction of Microsoft i.e., Microsoft and Franklin Templeton go up and down completely randomly.
Pair Corralation between Microsoft and Franklin Templeton
Given the investment horizon of 90 days Microsoft is expected to generate 2.36 times less return on investment than Franklin Templeton. In addition to that, Microsoft is 1.1 times more volatile than Franklin Templeton Smacs. It trades about 0.07 of its total potential returns per unit of risk. Franklin Templeton Smacs is currently generating about 0.19 per unit of volatility. If you would invest 976.00 in Franklin Templeton Smacs on June 12, 2025 and sell it today you would earn a total of 106.00 from holding Franklin Templeton Smacs or generate 10.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Franklin Templeton Smacs
Performance |
| Timeline |
| Microsoft |
| Franklin Templeton Smacs |
Microsoft and Franklin Templeton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Franklin Templeton
The main advantage of trading using opposite Microsoft and Franklin Templeton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Franklin Templeton 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 Templeton will offset losses from the drop in Franklin Templeton's long position.| Microsoft vs. Palantir Technologies Class | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Oracle | Microsoft vs. CoreWeave, Class A |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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