Correlation Between Materials Portfolio and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Materials Portfolio 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 Materials Portfolio and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Materials Portfolio Fidelity and Franklin Lifesmart 2045, you can compare the effects of market volatilities on Materials Portfolio 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 Materials Portfolio with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Portfolio and Franklin Lifesmart.
Diversification Opportunities for Materials Portfolio and Franklin Lifesmart
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Materials and Franklin is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Fidelity and Franklin Lifesmart 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2045 and Materials Portfolio 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 Materials Portfolio Fidelity 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 2045 has no effect on the direction of Materials Portfolio i.e., Materials Portfolio and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Materials Portfolio and Franklin Lifesmart
Assuming the 90 days horizon Materials Portfolio is expected to generate 2.09 times less return on investment than Franklin Lifesmart. In addition to that, Materials Portfolio is 1.4 times more volatile than Franklin Lifesmart 2045. It trades about 0.03 of its total potential returns per unit of risk. Franklin Lifesmart 2045 is currently generating about 0.08 per unit of volatility. If you would invest 1,517 in Franklin Lifesmart 2045 on September 3, 2024 and sell it today you would earn a total of 108.00 from holding Franklin Lifesmart 2045 or generate 7.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Materials Portfolio Fidelity vs. Franklin Lifesmart 2045
Performance |
| Timeline |
| Materials Portfolio |
| Franklin Lifesmart 2045 |
Materials Portfolio and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Materials Portfolio and Franklin Lifesmart
The main advantage of trading using opposite Materials Portfolio and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Portfolio 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.| Materials Portfolio vs. Vanguard Materials Index | Materials Portfolio vs. T Rowe Price | Materials Portfolio vs. Gmo Trust | Materials Portfolio vs. Gmo Resources |
| Franklin Lifesmart vs. Leggmason Partners Institutional | Franklin Lifesmart vs. Materials Portfolio Fidelity | Franklin Lifesmart vs. T Rowe Price | Franklin Lifesmart vs. Sei Daily Income |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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