Correlation Between Franklin Liberty and IShares Treasury

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Can any of the company-specific risk be diversified away by investing in both Franklin Liberty and IShares Treasury 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 IShares Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Liberty Treasury and iShares Treasury Bond, you can compare the effects of market volatilities on Franklin Liberty and IShares Treasury 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 IShares Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and IShares Treasury.

Diversification Opportunities for Franklin Liberty and IShares Treasury

1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between Franklin and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Treasury and iShares Treasury Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Treasury Bond 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 Treasury are associated (or correlated) with IShares Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Treasury Bond has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and IShares Treasury go up and down completely randomly.

Pair Corralation between Franklin Liberty and IShares Treasury

Given the investment horizon of 90 days Franklin Liberty Treasury is expected to generate 1.04 times more return on investment than IShares Treasury. However, Franklin Liberty is 1.04 times more volatile than iShares Treasury Bond. It trades about 0.04 of its potential returns per unit of risk. iShares Treasury Bond is currently generating about 0.04 per unit of risk. If you would invest  1,980  in Franklin Liberty Treasury on August 27, 2024 and sell it today you would earn a total of  49.00  from holding Franklin Liberty Treasury or generate 2.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Franklin Liberty Treasury  vs.  iShares Treasury Bond

 Performance 
       Timeline  
Franklin Liberty Treasury 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Franklin Liberty Treasury has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
iShares Treasury Bond 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days iShares Treasury Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Treasury is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Franklin Liberty and IShares Treasury Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Franklin Liberty and IShares Treasury

The main advantage of trading using opposite Franklin Liberty and IShares Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Liberty position performs unexpectedly, IShares Treasury 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 IShares Treasury will offset losses from the drop in IShares Treasury's long position.
The idea behind Franklin Liberty Treasury and iShares Treasury Bond 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.
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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