Correlation Between Franklin Lifesmart and Quantitative Longshort
Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart and Quantitative Longshort 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 Quantitative Longshort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Lifesmart 2030 and Quantitative Longshort Equity, you can compare the effects of market volatilities on Franklin Lifesmart and Quantitative Longshort 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 Quantitative Longshort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Quantitative Longshort.
Diversification Opportunities for Franklin Lifesmart and Quantitative Longshort
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Quantitative is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart 2030 and Quantitative Longshort Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantitative Longshort 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 2030 are associated (or correlated) with Quantitative Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantitative Longshort has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Quantitative Longshort go up and down completely randomly.
Pair Corralation between Franklin Lifesmart and Quantitative Longshort
Assuming the 90 days horizon Franklin Lifesmart is expected to generate 1.33 times less return on investment than Quantitative Longshort. But when comparing it to its historical volatility, Franklin Lifesmart 2030 is 1.36 times less risky than Quantitative Longshort. It trades about 0.31 of its potential returns per unit of risk. Quantitative Longshort Equity is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,421 in Quantitative Longshort Equity on September 1, 2024 and sell it today you would earn a total of 50.00 from holding Quantitative Longshort Equity or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Franklin Lifesmart 2030 vs. Quantitative Longshort Equity
Performance |
| Timeline |
| Franklin Lifesmart 2030 |
| Quantitative Longshort |
Franklin Lifesmart and Quantitative Longshort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Lifesmart and Quantitative Longshort
The main advantage of trading using opposite Franklin Lifesmart and Quantitative Longshort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart position performs unexpectedly, Quantitative Longshort 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 Quantitative Longshort will offset losses from the drop in Quantitative Longshort's long position.| Franklin Lifesmart vs. Baron Health Care | Franklin Lifesmart vs. Blackrock Health Sciences | Franklin Lifesmart vs. Highland Longshort Healthcare | Franklin Lifesmart vs. Invesco Global Health |
| Quantitative Longshort vs. Metropolitan West High | Quantitative Longshort vs. Pioneer High Yield | Quantitative Longshort vs. Western Asset High | Quantitative Longshort vs. Franklin High Income |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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