Correlation Between Franklin Liberty and FlexShares High
Can any of the company-specific risk be diversified away by investing in both Franklin Liberty and FlexShares High 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 Liberty and FlexShares High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Liberty Senior and FlexShares High Yield, you can compare the effects of market volatilities on Franklin Liberty and FlexShares High 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 Liberty with a short position of FlexShares High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and FlexShares High.
Diversification Opportunities for Franklin Liberty and FlexShares High
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and FlexShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Senior and FlexShares High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares High Yield and Franklin Liberty 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 Liberty Senior are associated (or correlated) with FlexShares High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares High Yield has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and FlexShares High go up and down completely randomly.
Pair Corralation between Franklin Liberty and FlexShares High
Given the investment horizon of 90 days Franklin Liberty is expected to generate 1.8 times less return on investment than FlexShares High. But when comparing it to its historical volatility, Franklin Liberty Senior is 2.86 times less risky than FlexShares High. It trades about 0.63 of its potential returns per unit of risk. FlexShares High Yield is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 4,078 in FlexShares High Yield on September 2, 2024 and sell it today you would earn a total of 73.00 from holding FlexShares High Yield or generate 1.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Liberty Senior vs. FlexShares High Yield
Performance |
| Timeline |
| Franklin Liberty Senior |
| FlexShares High Yield |
Franklin Liberty and FlexShares High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Liberty and FlexShares High
The main advantage of trading using opposite Franklin Liberty and FlexShares High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Liberty position performs unexpectedly, FlexShares High 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 FlexShares High will offset losses from the drop in FlexShares High's long position.The idea behind Franklin Liberty Senior and FlexShares High Yield 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.| FlexShares High vs. Xtrackers High Beta | FlexShares High vs. iShares Edge High | FlexShares High vs. Xtrackers USD High | FlexShares High vs. iShares Interest Rate |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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