Correlation Between Franklin FTSE and First Trust
Can any of the company-specific risk be diversified away by investing in both Franklin FTSE and First Trust 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 FTSE and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin FTSE Brazil and First Trust Brazil, you can compare the effects of market volatilities on Franklin FTSE and First Trust 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 FTSE with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin FTSE and First Trust.
Diversification Opportunities for Franklin FTSE and First Trust
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and First is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Franklin FTSE Brazil and First Trust Brazil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Brazil and Franklin FTSE 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 FTSE Brazil are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Brazil has no effect on the direction of Franklin FTSE i.e., Franklin FTSE and First Trust go up and down completely randomly.
Pair Corralation between Franklin FTSE and First Trust
Given the investment horizon of 90 days Franklin FTSE Brazil is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Franklin FTSE Brazil is 1.02 times less risky than First Trust. The etf trades about -0.12 of its potential returns per unit of risk. The First Trust Brazil is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 1,042 in First Trust Brazil on September 2, 2024 and sell it today you would lose (41.00) from holding First Trust Brazil or give up 3.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin FTSE Brazil vs. First Trust Brazil
Performance |
| Timeline |
| Franklin FTSE Brazil |
| First Trust Brazil |
Franklin FTSE and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin FTSE and First Trust
The main advantage of trading using opposite Franklin FTSE and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin FTSE position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Franklin FTSE vs. Franklin FTSE Mexico | Franklin FTSE vs. Franklin FTSE India | Franklin FTSE vs. Franklin FTSE South | Franklin FTSE vs. Franklin FTSE Japan |
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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