Correlation Between Columbia Small and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Columbia Small 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 Columbia Small and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Columbia Small Cap and Franklin Lifesmart 2040, you can compare the effects of market volatilities on Columbia Small 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 Columbia Small with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Small and Franklin Lifesmart.
Diversification Opportunities for Columbia Small and Franklin Lifesmart
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Columbia and Franklin is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Small Cap 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 Columbia Small 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 Columbia Small Cap 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 Columbia Small i.e., Columbia Small and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Columbia Small and Franklin Lifesmart
Assuming the 90 days horizon Columbia Small is expected to generate 1.24 times less return on investment than Franklin Lifesmart. In addition to that, Columbia Small is 2.08 times more volatile than Franklin Lifesmart 2040. It trades about 0.04 of its total potential returns per unit of risk. Franklin Lifesmart 2040 is currently generating about 0.11 per unit of volatility. If you would invest 1,211 in Franklin Lifesmart 2040 on September 12, 2024 and sell it today you would earn a total of 317.00 from holding Franklin Lifesmart 2040 or generate 26.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.98% |
| Values | Daily Returns |
Columbia Small Cap vs. Franklin Lifesmart 2040
Performance |
| Timeline |
| Columbia Small Cap |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Franklin Lifesmart 2040 |
Columbia Small and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Columbia Small and Franklin Lifesmart
The main advantage of trading using opposite Columbia Small and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Small 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.| Columbia Small vs. Vanguard Small Cap Value | Columbia Small vs. Vanguard Small Cap Value | Columbia Small vs. Us Small Cap | Columbia Small vs. Us Targeted Value |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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