Correlation Between Franklin Liberty and IShares Edge
Can any of the company-specific risk be diversified away by investing in both Franklin Liberty and IShares Edge 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 Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Liberty High and iShares Edge High, you can compare the effects of market volatilities on Franklin Liberty and IShares Edge 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 Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and IShares Edge.
Diversification Opportunities for Franklin Liberty and IShares Edge
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty High and iShares Edge High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge High 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 High are associated (or correlated) with IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge High has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and IShares Edge go up and down completely randomly.
Pair Corralation between Franklin Liberty and IShares Edge
Given the investment horizon of 90 days Franklin Liberty is expected to generate 1.64 times less return on investment than IShares Edge. But when comparing it to its historical volatility, Franklin Liberty High is 1.08 times less risky than IShares Edge. It trades about 0.17 of its potential returns per unit of risk. iShares Edge High is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 4,717 in iShares Edge High on August 31, 2024 and sell it today you would earn a total of 68.00 from holding iShares Edge High or generate 1.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Liberty High vs. iShares Edge High
Performance |
| Timeline |
| Franklin Liberty High |
| iShares Edge High |
Franklin Liberty and IShares Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Liberty and IShares Edge
The main advantage of trading using opposite Franklin Liberty and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Liberty position performs unexpectedly, IShares Edge 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 Edge will offset losses from the drop in IShares Edge's long position.| Franklin Liberty vs. iShares Edge High | Franklin Liberty vs. Franklin Liberty Senior | Franklin Liberty vs. Franklin Liberty International | Franklin Liberty vs. PGIM Active High |
| IShares Edge vs. Xtrackers High Beta | IShares Edge vs. Xtrackers Short Duration | IShares Edge vs. FlexShares High Yield |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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