Correlation Between Dow Jones and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Franklin Lifesmart 2030, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Franklin Lifesmart.
Diversification Opportunities for Dow Jones and Franklin Lifesmart
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and Franklin is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Franklin Lifesmart 2030 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2030 and Dow Jones 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 Dow Jones Industrial 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 2030 has no effect on the direction of Dow Jones i.e., Dow Jones and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Dow Jones and Franklin Lifesmart
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 2.36 times more return on investment than Franklin Lifesmart. However, Dow Jones is 2.36 times more volatile than Franklin Lifesmart 2030. It trades about 0.37 of its potential returns per unit of risk. Franklin Lifesmart 2030 is currently generating about 0.31 per unit of risk. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Franklin Lifesmart 2030
Performance |
| Timeline |
Dow Jones and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Franklin Lifesmart 2030
Pair trading matchups for Franklin Lifesmart
Pair Trading with Dow Jones and Franklin Lifesmart
The main advantage of trading using opposite Dow Jones and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Franklin Lifesmart vs. Baron Health Care | Franklin Lifesmart vs. Blackrock Health Sciences | Franklin Lifesmart vs. Highland Longshort Healthcare | Franklin Lifesmart vs. Invesco Global Health |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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