Correlation Between Franklin FTSE and CHIK

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

Diversification Opportunities for Franklin FTSE and CHIK

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Franklin and CHIK is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Franklin FTSE Japan and CHIK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHIK 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 Japan are associated (or correlated) with CHIK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHIK has no effect on the direction of Franklin FTSE i.e., Franklin FTSE and CHIK go up and down completely randomly.

Pair Corralation between Franklin FTSE and CHIK

If you would invest  2,950  in Franklin FTSE Japan on September 12, 2024 and sell it today you would earn a total of  15.00  from holding Franklin FTSE Japan or generate 0.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy4.76%
ValuesDaily Returns

Franklin FTSE Japan  vs.  CHIK

 Performance 
       Timeline  
Franklin FTSE Japan 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Franklin FTSE Japan has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking indicators, Franklin FTSE is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.
CHIK 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CHIK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, CHIK is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Franklin FTSE and CHIK Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Franklin FTSE and CHIK

The main advantage of trading using opposite Franklin FTSE and CHIK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin FTSE position performs unexpectedly, CHIK 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 CHIK will offset losses from the drop in CHIK's long position.
The idea behind Franklin FTSE Japan and CHIK 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.
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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