Correlation Between Franklin Lifesmart and Lifestyle
Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart and Lifestyle 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 Lifestyle 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 Lifestyle Ii Moderate, you can compare the effects of market volatilities on Franklin Lifesmart and Lifestyle 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 Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Lifestyle.
Diversification Opportunities for Franklin Lifesmart and Lifestyle
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between FRANKLIN and Lifestyle is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart Retirement and Lifestyle Ii Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifestyle Ii Moderate 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 Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifestyle Ii Moderate has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Lifestyle go up and down completely randomly.
Pair Corralation between Franklin Lifesmart and Lifestyle
Assuming the 90 days horizon Franklin Lifesmart is expected to generate 1.0 times less return on investment than Lifestyle. But when comparing it to its historical volatility, Franklin Lifesmart Retirement is 1.15 times less risky than Lifestyle. It trades about 0.15 of its potential returns per unit of risk. Lifestyle Ii Moderate is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,094 in Lifestyle Ii Moderate on September 2, 2024 and sell it today you would earn a total of 29.00 from holding Lifestyle Ii Moderate or generate 2.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Lifesmart Retirement vs. Lifestyle Ii Moderate
Performance |
| Timeline |
| Franklin Lifesmart |
| Lifestyle Ii Moderate |
Franklin Lifesmart and Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Lifesmart and Lifestyle
The main advantage of trading using opposite Franklin Lifesmart and Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart position performs unexpectedly, Lifestyle 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 Lifestyle will offset losses from the drop in Lifestyle's long position.| Franklin Lifesmart vs. Maryland Short Term Tax Free | Franklin Lifesmart vs. Barings Active Short | Franklin Lifesmart vs. Touchstone Ultra Short | Franklin Lifesmart vs. Goldman Sachs Short Term |
| Lifestyle vs. Regional Bank Fund | Lifestyle vs. Regional Bank Fund | Lifestyle vs. Multimanager Lifestyle Moderate | Lifestyle vs. Multimanager Lifestyle Balanced |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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