Correlation Between Franklin Lifesmart and Vanguard Lifestrategy
Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart and Vanguard Lifestrategy 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 Vanguard Lifestrategy 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 Vanguard Lifestrategy Moderate, you can compare the effects of market volatilities on Franklin Lifesmart and Vanguard Lifestrategy 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 Vanguard Lifestrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Vanguard Lifestrategy.
Diversification Opportunities for Franklin Lifesmart and Vanguard Lifestrategy
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Vanguard is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart 2050 and Vanguard Lifestrategy Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Lifestrategy 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 Vanguard Lifestrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Lifestrategy has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Vanguard Lifestrategy go up and down completely randomly.
Pair Corralation between Franklin Lifesmart and Vanguard Lifestrategy
Assuming the 90 days horizon Franklin Lifesmart 2050 is expected to generate 1.44 times more return on investment than Vanguard Lifestrategy. However, Franklin Lifesmart is 1.44 times more volatile than Vanguard Lifestrategy Moderate. It trades about 0.07 of its potential returns per unit of risk. Vanguard Lifestrategy Moderate is currently generating about 0.08 per unit of risk. If you would invest 1,562 in Franklin Lifesmart 2050 on November 5, 2024 and sell it today you would earn a total of 16.00 from holding Franklin Lifesmart 2050 or generate 1.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Lifesmart 2050 vs. Vanguard Lifestrategy Moderate
Performance |
| Timeline |
| Franklin Lifesmart 2050 |
| Vanguard Lifestrategy |
Franklin Lifesmart and Vanguard Lifestrategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Lifesmart and Vanguard Lifestrategy
The main advantage of trading using opposite Franklin Lifesmart and Vanguard Lifestrategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart position performs unexpectedly, Vanguard Lifestrategy 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 Vanguard Lifestrategy will offset losses from the drop in Vanguard Lifestrategy's long position.| Franklin Lifesmart vs. Franklin Mutual Beacon | Franklin Lifesmart vs. Templeton Developing Markets | Franklin Lifesmart vs. Franklin Mutual Global | Franklin Lifesmart vs. Franklin Mutual Global |
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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