Correlation Between Franklin International and IShares Emerging
Can any of the company-specific risk be diversified away by investing in both Franklin International and IShares Emerging 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 International and IShares Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin International Core and iShares Emerging Markets, you can compare the effects of market volatilities on Franklin International and IShares Emerging 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 International with a short position of IShares Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin International and IShares Emerging.
Diversification Opportunities for Franklin International and IShares Emerging
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Franklin and IShares is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Franklin International Core and iShares Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Emerging Markets and Franklin International 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 International Core are associated (or correlated) with IShares Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Emerging Markets has no effect on the direction of Franklin International i.e., Franklin International and IShares Emerging go up and down completely randomly.
Pair Corralation between Franklin International and IShares Emerging
Given the investment horizon of 90 days Franklin International Core is expected to generate 0.89 times more return on investment than IShares Emerging. However, Franklin International Core is 1.12 times less risky than IShares Emerging. It trades about -0.07 of its potential returns per unit of risk. iShares Emerging Markets is currently generating about -0.17 per unit of risk. If you would invest 3,150 in Franklin International Core on September 3, 2024 and sell it today you would lose (42.00) from holding Franklin International Core or give up 1.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin International Core vs. iShares Emerging Markets
Performance |
| Timeline |
| Franklin International |
| iShares Emerging Markets |
Franklin International and IShares Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin International and IShares Emerging
The main advantage of trading using opposite Franklin International and IShares Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin International position performs unexpectedly, IShares Emerging 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 IShares Emerging will offset losses from the drop in IShares Emerging's long position.The idea behind Franklin International Core and iShares Emerging Markets 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.
| IShares Emerging vs. SCOR PK | IShares Emerging vs. HUMANA INC | IShares Emerging vs. Aquagold International | IShares Emerging vs. Barloworld Ltd ADR |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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