Correlation Between Franklin North and Franklin Lifesmart

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Can any of the company-specific risk be diversified away by investing in both Franklin North and Franklin Lifesmart 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 North and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin North Carolina and Franklin Lifesmart 2035, you can compare the effects of market volatilities on Franklin North and Franklin Lifesmart 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 North with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin North and Franklin Lifesmart.

Diversification Opportunities for Franklin North and Franklin Lifesmart

FranklinFranklinDiversified AwayFranklinFranklinDiversified Away100%
0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Franklin and Franklin is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Franklin North Carolina and Franklin Lifesmart 2035 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2035 and Franklin North 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 North Carolina are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2035 has no effect on the direction of Franklin North i.e., Franklin North and Franklin Lifesmart go up and down completely randomly.

Pair Corralation between Franklin North and Franklin Lifesmart

Assuming the 90 days horizon Franklin North Carolina is expected to generate 0.53 times more return on investment than Franklin Lifesmart. However, Franklin North Carolina is 1.9 times less risky than Franklin Lifesmart. It trades about 0.18 of its potential returns per unit of risk. Franklin Lifesmart 2035 is currently generating about 0.03 per unit of risk. If you would invest  1,041  in Franklin North Carolina on November 25, 2024 and sell it today you would earn a total of  10.00  from holding Franklin North Carolina or generate 0.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Franklin North Carolina  vs.  Franklin Lifesmart 2035

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -2-1012
JavaScript chart by amCharts 3.21.15FQNCX FLRHX
       Timeline  
Franklin North Carolina 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Franklin North Carolina has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Franklin North is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb10.3510.410.4510.510.5510.6
Franklin Lifesmart 2035 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Lifesmart 2035 are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Franklin Lifesmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb14.614.714.814.91515.115.215.3

Franklin North and Franklin Lifesmart Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.81-0.56-0.31-0.08850.00.08490.30.550.81.05 12345
JavaScript chart by amCharts 3.21.15FQNCX FLRHX
       Returns  

Pair Trading with Franklin North and Franklin Lifesmart

The main advantage of trading using opposite Franklin North and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin North position performs unexpectedly, Franklin Lifesmart 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 Lifesmart will offset losses from the drop in Franklin Lifesmart's long position.
The idea behind Franklin North Carolina and Franklin Lifesmart 2035 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.
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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