Correlation Between IShares USD and Franklin Liberty
Can any of the company-specific risk be diversified away by investing in both IShares USD and Franklin Liberty 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 IShares USD and Franklin Liberty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares USD Green and Franklin Liberty High, you can compare the effects of market volatilities on IShares USD and Franklin Liberty 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 IShares USD with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares USD and Franklin Liberty.
Diversification Opportunities for IShares USD and Franklin Liberty
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IShares and Franklin is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding iShares USD Green and Franklin Liberty High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty High and IShares USD 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 iShares USD Green are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty High has no effect on the direction of IShares USD i.e., IShares USD and Franklin Liberty go up and down completely randomly.
Pair Corralation between IShares USD and Franklin Liberty
Given the investment horizon of 90 days IShares USD is expected to generate 1.82 times less return on investment than Franklin Liberty. In addition to that, IShares USD is 1.06 times more volatile than Franklin Liberty High. It trades about 0.08 of its total potential returns per unit of risk. Franklin Liberty High is currently generating about 0.16 per unit of volatility. If you would invest 2,172 in Franklin Liberty High on August 27, 2024 and sell it today you would earn a total of 240.00 from holding Franklin Liberty High or generate 11.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares USD Green vs. Franklin Liberty High
Performance |
| Timeline |
| iShares USD Green |
| Franklin Liberty High |
IShares USD and Franklin Liberty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares USD and Franklin Liberty
The main advantage of trading using opposite IShares USD and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares USD position performs unexpectedly, Franklin Liberty 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 Liberty will offset losses from the drop in Franklin Liberty's long position.| IShares USD vs. Franklin Liberty High | IShares USD vs. Franklin Liberty Senior | IShares USD vs. Franklin Liberty Intermediate | IShares USD vs. Franklin Liberty Short |
| Franklin Liberty vs. First Trust Senior | Franklin Liberty vs. First Trust Low | Franklin Liberty vs. First Trust Enhanced | Franklin Liberty vs. First Trust TCW |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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