Correlation Between Franklin Lifesmart and Catalyst Insider
Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart and Catalyst Insider 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 Catalyst Insider into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Lifesmart 2050 and Catalyst Insider Income, you can compare the effects of market volatilities on Franklin Lifesmart and Catalyst Insider 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 Catalyst Insider. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Catalyst Insider.
Diversification Opportunities for Franklin Lifesmart and Catalyst Insider
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Catalyst is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart 2050 and Catalyst Insider Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Insider Income 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 2050 are associated (or correlated) with Catalyst Insider. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Insider Income has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Catalyst Insider go up and down completely randomly.
Pair Corralation between Franklin Lifesmart and Catalyst Insider
Assuming the 90 days horizon Franklin Lifesmart 2050 is expected to generate 3.19 times more return on investment than Catalyst Insider. However, Franklin Lifesmart is 3.19 times more volatile than Catalyst Insider Income. It trades about 0.17 of its potential returns per unit of risk. Catalyst Insider Income is currently generating about 0.29 per unit of risk. If you would invest 1,596 in Franklin Lifesmart 2050 on September 13, 2024 and sell it today you would earn a total of 24.00 from holding Franklin Lifesmart 2050 or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Franklin Lifesmart 2050 vs. Catalyst Insider Income
Performance |
| Timeline |
| Franklin Lifesmart 2050 |
| Catalyst Insider Income |
Franklin Lifesmart and Catalyst Insider Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Lifesmart and Catalyst Insider
The main advantage of trading using opposite Franklin Lifesmart and Catalyst Insider positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart position performs unexpectedly, Catalyst Insider 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 Catalyst Insider will offset losses from the drop in Catalyst Insider's long position.The idea behind Franklin Lifesmart 2050 and Catalyst Insider Income 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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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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