Correlation Between Franklin International and First Trust
Can any of the company-specific risk be diversified away by investing in both Franklin International and First Trust 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 First Trust 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 First Trust Exchange Traded, you can compare the effects of market volatilities on Franklin International and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin International and First Trust.
Diversification Opportunities for Franklin International and First Trust
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Franklin and First is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Franklin International Core and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of Franklin International i.e., Franklin International and First Trust go up and down completely randomly.
Pair Corralation between Franklin International and First Trust
Given the investment horizon of 90 days Franklin International is expected to generate 1.81 times less return on investment than First Trust. But when comparing it to its historical volatility, Franklin International Core is 1.39 times less risky than First Trust. It trades about 0.22 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 6,684 in First Trust Exchange Traded on October 21, 2024 and sell it today you would earn a total of 299.00 from holding First Trust Exchange Traded or generate 4.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin International Core vs. First Trust Exchange Traded
Performance |
| Timeline |
| Franklin International |
| First Trust Exchange |
Franklin International and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin International and First Trust
The main advantage of trading using opposite Franklin International and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin International position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.The idea behind Franklin International Core and First Trust Exchange Traded 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.
| First Trust vs. Franklin Core Dividend | First Trust vs. WisdomTree Trust | First Trust vs. Invesco SP MidCap |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |