Correlation Between Consumer Staples and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Consumer Staples 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 Consumer Staples and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumer Staples Portfolio and Franklin Lifesmart Retirement, you can compare the effects of market volatilities on Consumer Staples 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 Consumer Staples with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Staples and Franklin Lifesmart.
Diversification Opportunities for Consumer Staples and Franklin Lifesmart
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Consumer and Franklin is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Staples Portfolio and Franklin Lifesmart Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart and Consumer Staples 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 Consumer Staples Portfolio 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 has no effect on the direction of Consumer Staples i.e., Consumer Staples and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Consumer Staples and Franklin Lifesmart
Assuming the 90 days horizon Consumer Staples Portfolio is expected to generate 2.81 times more return on investment than Franklin Lifesmart. However, Consumer Staples is 2.81 times more volatile than Franklin Lifesmart Retirement. It trades about 0.05 of its potential returns per unit of risk. Franklin Lifesmart Retirement is currently generating about 0.14 per unit of risk. If you would invest 8,680 in Consumer Staples Portfolio on November 30, 2024 and sell it today you would earn a total of 175.00 from holding Consumer Staples Portfolio or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Staples Portfolio vs. Franklin Lifesmart Retirement
Performance |
| Timeline |
| Consumer Staples Por |
| Franklin Lifesmart |
Consumer Staples and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Staples and Franklin Lifesmart
The main advantage of trading using opposite Consumer Staples and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Staples 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.| Consumer Staples vs. Baron Select Funds | Consumer Staples vs. Goldman Sachs Technology | Consumer Staples vs. Global Technology Portfolio | Consumer Staples vs. Virtus Artificial Intelligence |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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