Correlation Between First Trust and Franklin Templeton
Can any of the company-specific risk be diversified away by investing in both First Trust and Franklin Templeton 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 First Trust and Franklin Templeton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Intermediate and Franklin Templeton Limited, you can compare the effects of market volatilities on First Trust and Franklin Templeton 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 First Trust with a short position of Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Franklin Templeton.
Diversification Opportunities for First Trust and Franklin Templeton
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Franklin is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Intermediate and Franklin Templeton Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton and First Trust 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 First Trust Intermediate are associated (or correlated) with Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton has no effect on the direction of First Trust i.e., First Trust and Franklin Templeton go up and down completely randomly.
Pair Corralation between First Trust and Franklin Templeton
Considering the 90-day investment horizon First Trust Intermediate is expected to generate 1.48 times more return on investment than Franklin Templeton. However, First Trust is 1.48 times more volatile than Franklin Templeton Limited. It trades about 0.06 of its potential returns per unit of risk. Franklin Templeton Limited is currently generating about 0.09 per unit of risk. If you would invest 1,447 in First Trust Intermediate on August 30, 2024 and sell it today you would earn a total of 433.00 from holding First Trust Intermediate or generate 29.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Intermediate vs. Franklin Templeton Limited
Performance |
| Timeline |
| First Trust Intermediate |
| Franklin Templeton |
First Trust and Franklin Templeton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Franklin Templeton
The main advantage of trading using opposite First Trust and Franklin Templeton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Franklin Templeton 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 Franklin Templeton will offset losses from the drop in Franklin Templeton's long position.| First Trust vs. Tekla Healthcare Investors | First Trust vs. Tekla Healthcare Opportunities | First Trust vs. Eaton Vance Tax | First Trust vs. Tekla World Healthcare |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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