Correlation Between Franklin Libertyshares and Scottish Mortgage
Can any of the company-specific risk be diversified away by investing in both Franklin Libertyshares and Scottish Mortgage 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 Libertyshares and Scottish Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Libertyshares ICAV and Scottish Mortgage Investment, you can compare the effects of market volatilities on Franklin Libertyshares and Scottish Mortgage 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 Libertyshares with a short position of Scottish Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Libertyshares and Scottish Mortgage.
Diversification Opportunities for Franklin Libertyshares and Scottish Mortgage
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Scottish is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Libertyshares ICAV and Scottish Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scottish Mortgage and Franklin Libertyshares 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 Libertyshares ICAV are associated (or correlated) with Scottish Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scottish Mortgage has no effect on the direction of Franklin Libertyshares i.e., Franklin Libertyshares and Scottish Mortgage go up and down completely randomly.
Pair Corralation between Franklin Libertyshares and Scottish Mortgage
Assuming the 90 days trading horizon Franklin Libertyshares is expected to generate 5.41 times less return on investment than Scottish Mortgage. But when comparing it to its historical volatility, Franklin Libertyshares ICAV is 1.45 times less risky than Scottish Mortgage. It trades about 0.05 of its potential returns per unit of risk. Scottish Mortgage Investment is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 82,215 in Scottish Mortgage Investment on September 2, 2024 and sell it today you would earn a total of 12,065 from holding Scottish Mortgage Investment or generate 14.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Libertyshares ICAV vs. Scottish Mortgage Investment
Performance |
| Timeline |
| Franklin Libertyshares |
| Scottish Mortgage |
Franklin Libertyshares and Scottish Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Libertyshares and Scottish Mortgage
The main advantage of trading using opposite Franklin Libertyshares and Scottish Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Libertyshares position performs unexpectedly, Scottish Mortgage 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 Scottish Mortgage will offset losses from the drop in Scottish Mortgage's long position.The idea behind Franklin Libertyshares ICAV and Scottish Mortgage Investment 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.
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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