Correlation Between Franklin Lifesmart and Columbia Mid
Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart and Columbia Mid 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 Lifesmart and Columbia Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Lifesmart Retirement and Columbia Mid Cap, you can compare the effects of market volatilities on Franklin Lifesmart and Columbia Mid 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 Lifesmart with a short position of Columbia Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Columbia Mid.
Diversification Opportunities for Franklin Lifesmart and Columbia Mid
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Columbia is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart Retirement and Columbia Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Mid Cap and Franklin Lifesmart 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 Lifesmart Retirement are associated (or correlated) with Columbia Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Mid Cap has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Columbia Mid go up and down completely randomly.
Pair Corralation between Franklin Lifesmart and Columbia Mid
Assuming the 90 days horizon Franklin Lifesmart is expected to generate 2.52 times less return on investment than Columbia Mid. But when comparing it to its historical volatility, Franklin Lifesmart Retirement is 3.01 times less risky than Columbia Mid. It trades about 0.1 of its potential returns per unit of risk. Columbia Mid Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,102 in Columbia Mid Cap on September 3, 2024 and sell it today you would earn a total of 1,205 from holding Columbia Mid Cap or generate 57.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Lifesmart Retirement vs. Columbia Mid Cap
Performance |
| Timeline |
| Franklin Lifesmart |
| Columbia Mid Cap |
Franklin Lifesmart and Columbia Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Lifesmart and Columbia Mid
The main advantage of trading using opposite Franklin Lifesmart and Columbia Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart position performs unexpectedly, Columbia Mid 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 Columbia Mid will offset losses from the drop in Columbia Mid's long position.| Franklin Lifesmart vs. Health Biotchnology Portfolio | Franklin Lifesmart vs. Baillie Gifford Health | Franklin Lifesmart vs. Eventide Healthcare Life | Franklin Lifesmart vs. Health Biotchnology Portfolio |
| Columbia Mid vs. Prudential Financial Services | Columbia Mid vs. Fidelity Advisor Financial | Columbia Mid vs. Mesirow Financial Small | Columbia Mid vs. Gabelli Global Financial |
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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