Correlation Between FlexShares ESG and Franklin Liberty
Can any of the company-specific risk be diversified away by investing in both FlexShares ESG and Franklin Liberty 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 FlexShares ESG and Franklin Liberty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares ESG Climate and Franklin Liberty Investment, you can compare the effects of market volatilities on FlexShares ESG and Franklin Liberty 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 FlexShares ESG with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares ESG and Franklin Liberty.
Diversification Opportunities for FlexShares ESG and Franklin Liberty
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FlexShares and Franklin is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares ESG Climate and Franklin Liberty Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Inv and FlexShares ESG 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 FlexShares ESG Climate are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Inv has no effect on the direction of FlexShares ESG i.e., FlexShares ESG and Franklin Liberty go up and down completely randomly.
Pair Corralation between FlexShares ESG and Franklin Liberty
Given the investment horizon of 90 days FlexShares ESG Climate is expected to generate 1.86 times more return on investment than Franklin Liberty. However, FlexShares ESG is 1.86 times more volatile than Franklin Liberty Investment. It trades about 0.05 of its potential returns per unit of risk. Franklin Liberty Investment is currently generating about 0.04 per unit of risk. If you would invest 4,052 in FlexShares ESG Climate on August 29, 2024 and sell it today you would earn a total of 888.00 from holding FlexShares ESG Climate or generate 21.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares ESG Climate vs. Franklin Liberty Investment
Performance |
| Timeline |
| FlexShares ESG Climate |
| Franklin Liberty Inv |
FlexShares ESG and Franklin Liberty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares ESG and Franklin Liberty
The main advantage of trading using opposite FlexShares ESG and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares ESG position performs unexpectedly, Franklin Liberty 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 Liberty will offset losses from the drop in Franklin Liberty's long position.The idea behind FlexShares ESG Climate and Franklin Liberty 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.| Franklin Liberty vs. Franklin Liberty Short | Franklin Liberty vs. Goldman Sachs Access | Franklin Liberty vs. Franklin Templeton ETF | Franklin Liberty vs. Franklin Liberty Federal |
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 CEOs Directory module to screen CEOs from public companies around the world.
Other Complementary Tools
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |