Correlation Between Franklin Equity and State Street

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

By analyzing existing cross correlation between Franklin Equity Income and State Street Smallmid, you can compare the effects of market volatilities on Franklin Equity and State Street 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 Equity with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Equity and State Street.

Diversification Opportunities for Franklin Equity and State Street

0.95

Correlation Coefficient

Franklin Equity  State Street

Almost no diversification

The 3 months correlation between Franklin and State is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Equity Income and State Street Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Smallmid and Franklin Equity 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 Equity Income are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Smallmid has no effect on the direction of Franklin Equity i.e., Franklin Equity and State Street go up and down completely randomly.

Pair Corralation between Franklin Equity and State Street

Assuming the 90 days horizon Franklin Equity is expected to generate 1.5 times less return on investment than State Street. But when comparing it to its historical volatility, Franklin Equity Income is 1.81 times less risky than State Street. It trades about 0.18 of its potential returns per unit of risk. State Street Smallmid is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  31,200  in State Street Smallmid on July 1, 2025 and sell it today you would earn a total of  2,722  from holding State Street Smallmid or generate 8.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Franklin Equity Income  vs.  State Street Smallmid

Franklin Equity Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Equity Income are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Franklin Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

State Street Smallmid

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Smallmid are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, State Street may actually be approaching a critical reversion point that can send shares even higher in October 2025.

Pair Trading with Franklin Equity and State Street

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

The idea behind Franklin Equity Income and State Street Smallmid 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.

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 CEOs Directory module to screen CEOs from public companies around the world.