Correlation Between Franklin International and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Franklin International and IShares MSCI 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 MSCI 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 MSCI China, you can compare the effects of market volatilities on Franklin International and IShares MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin International and IShares MSCI.
Diversification Opportunities for Franklin International and IShares MSCI
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Franklin International Core and iShares MSCI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI China 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI China has no effect on the direction of Franklin International i.e., Franklin International and IShares MSCI go up and down completely randomly.
Pair Corralation between Franklin International and IShares MSCI
Given the investment horizon of 90 days Franklin International is expected to generate 1.19 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, Franklin International Core is 2.19 times less risky than IShares MSCI. It trades about 0.06 of its potential returns per unit of risk. iShares MSCI China is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,408 in iShares MSCI China on December 24, 2024 and sell it today you would earn a total of 1,157 from holding iShares MSCI China or generate 26.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin International Core vs. iShares MSCI China
Performance |
| Timeline |
| Franklin International |
| iShares MSCI China |
Franklin International and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin International and IShares MSCI
The main advantage of trading using opposite Franklin International and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin International position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.The idea behind Franklin International Core and iShares MSCI China 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 MSCI vs. KraneShares CSI China | IShares MSCI vs. Invesco China Technology | IShares MSCI vs. iShares MSCI India | IShares MSCI vs. Xtrackers Harvest CSI |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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