Correlation Between Blackrock Government and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Blackrock Government and Franklin Lifesmart 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 Blackrock Government and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blackrock Government Bond and Franklin Lifesmart 2040, you can compare the effects of market volatilities on Blackrock Government and Franklin Lifesmart 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 Blackrock Government with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Government and Franklin Lifesmart.
Diversification Opportunities for Blackrock Government and Franklin Lifesmart
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Blackrock and Franklin is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Government Bond and Franklin Lifesmart 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2040 and Blackrock Government 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 Blackrock Government Bond are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2040 has no effect on the direction of Blackrock Government i.e., Blackrock Government and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Blackrock Government and Franklin Lifesmart
Assuming the 90 days horizon Blackrock Government is expected to generate 4.9 times less return on investment than Franklin Lifesmart. But when comparing it to its historical volatility, Blackrock Government Bond is 1.34 times less risky than Franklin Lifesmart. It trades about 0.02 of its potential returns per unit of risk. Franklin Lifesmart 2040 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,156 in Franklin Lifesmart 2040 on September 3, 2024 and sell it today you would earn a total of 357.00 from holding Franklin Lifesmart 2040 or generate 30.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blackrock Government Bond vs. Franklin Lifesmart 2040
Performance |
| Timeline |
| Blackrock Government Bond |
| Franklin Lifesmart 2040 |
Blackrock Government and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blackrock Government and Franklin Lifesmart
The main advantage of trading using opposite Blackrock Government and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackrock Government position performs unexpectedly, Franklin Lifesmart 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 Lifesmart will offset losses from the drop in Franklin Lifesmart's long position.The idea behind Blackrock Government Bond and Franklin Lifesmart 2040 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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