Correlation Between Franklin Lifesmart and Nasdaq-100 Fund
Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart and Nasdaq-100 Fund 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 Nasdaq-100 Fund 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 Nasdaq 100 Fund Investor, you can compare the effects of market volatilities on Franklin Lifesmart and Nasdaq-100 Fund 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 Nasdaq-100 Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Nasdaq-100 Fund.
Diversification Opportunities for Franklin Lifesmart and Nasdaq-100 Fund
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between FRANKLIN and Nasdaq-100 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart 2050 and Nasdaq 100 Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Fund 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 Nasdaq-100 Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 Fund has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Nasdaq-100 Fund go up and down completely randomly.
Pair Corralation between Franklin Lifesmart and Nasdaq-100 Fund
Assuming the 90 days horizon Franklin Lifesmart is expected to generate 1.25 times less return on investment than Nasdaq-100 Fund. But when comparing it to its historical volatility, Franklin Lifesmart 2050 is 1.56 times less risky than Nasdaq-100 Fund. It trades about 0.13 of its potential returns per unit of risk. Nasdaq 100 Fund Investor is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,830 in Nasdaq 100 Fund Investor on September 5, 2024 and sell it today you would earn a total of 2,048 from holding Nasdaq 100 Fund Investor or generate 29.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Franklin Lifesmart 2050 vs. Nasdaq 100 Fund Investor
Performance |
| Timeline |
| Franklin Lifesmart 2050 |
| Nasdaq 100 Fund |
Franklin Lifesmart and Nasdaq-100 Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Lifesmart and Nasdaq-100 Fund
The main advantage of trading using opposite Franklin Lifesmart and Nasdaq-100 Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart position performs unexpectedly, Nasdaq-100 Fund 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 Nasdaq-100 Fund will offset losses from the drop in Nasdaq-100 Fund's long position.| Franklin Lifesmart vs. Qs Moderate Growth | Franklin Lifesmart vs. T Rowe Price | Franklin Lifesmart vs. T Rowe Price | Franklin Lifesmart vs. Virtus Dfa 2040 |
| Nasdaq-100 Fund vs. Old Westbury Short Term | Nasdaq-100 Fund vs. Maryland Short Term Tax Free | Nasdaq-100 Fund vs. Limited Term Tax | Nasdaq-100 Fund vs. Touchstone Ultra Short |
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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