Correlation Between Franklin Lifesmart and Blackrock Strategic
Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart and Blackrock Strategic 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 Blackrock Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Lifesmart Retirement and Blackrock Strategic Income, you can compare the effects of market volatilities on Franklin Lifesmart and Blackrock Strategic 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 Blackrock Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Blackrock Strategic.
Diversification Opportunities for Franklin Lifesmart and Blackrock Strategic
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Blackrock is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart Retirement and Blackrock Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Strategic 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 Retirement are associated (or correlated) with Blackrock Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Strategic has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Blackrock Strategic go up and down completely randomly.
Pair Corralation between Franklin Lifesmart and Blackrock Strategic
Assuming the 90 days horizon Franklin Lifesmart is expected to generate 1.05 times less return on investment than Blackrock Strategic. In addition to that, Franklin Lifesmart is 2.07 times more volatile than Blackrock Strategic Income. It trades about 0.1 of its total potential returns per unit of risk. Blackrock Strategic Income is currently generating about 0.22 per unit of volatility. If you would invest 947.00 in Blackrock Strategic Income on August 28, 2024 and sell it today you would earn a total of 7.00 from holding Blackrock Strategic Income or generate 0.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Franklin Lifesmart Retirement vs. Blackrock Strategic Income
Performance |
| Timeline |
| Franklin Lifesmart |
| Blackrock Strategic |
Franklin Lifesmart and Blackrock Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Lifesmart and Blackrock Strategic
The main advantage of trading using opposite Franklin Lifesmart and Blackrock Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart position performs unexpectedly, Blackrock Strategic 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 Blackrock Strategic will offset losses from the drop in Blackrock Strategic's long position.The idea behind Franklin Lifesmart Retirement and Blackrock Strategic 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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