Correlation Between Franklin Lifesmart and Franklin Moderate
Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart and Franklin Moderate 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 Franklin Moderate 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 Franklin Moderate Allocation, you can compare the effects of market volatilities on Franklin Lifesmart and Franklin Moderate 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 Franklin Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Franklin Moderate.
Diversification Opportunities for Franklin Lifesmart and Franklin Moderate
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Franklin is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart Retirement and Franklin Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Moderate 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 Franklin Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Moderate has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Franklin Moderate go up and down completely randomly.
Pair Corralation between Franklin Lifesmart and Franklin Moderate
Assuming the 90 days horizon Franklin Lifesmart is expected to generate 1.69 times less return on investment than Franklin Moderate. But when comparing it to its historical volatility, Franklin Lifesmart Retirement is 1.5 times less risky than Franklin Moderate. It trades about 0.31 of its potential returns per unit of risk. Franklin Moderate Allocation is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,578 in Franklin Moderate Allocation on September 1, 2024 and sell it today you would earn a total of 51.00 from holding Franklin Moderate Allocation or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Franklin Lifesmart Retirement vs. Franklin Moderate Allocation
Performance |
| Timeline |
| Franklin Lifesmart |
| Franklin Moderate |
Franklin Lifesmart and Franklin Moderate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Lifesmart and Franklin Moderate
The main advantage of trading using opposite Franklin Lifesmart and Franklin Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart position performs unexpectedly, Franklin Moderate 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 Moderate will offset losses from the drop in Franklin Moderate's long position.| Franklin Lifesmart vs. Goldman Sachs Large | Franklin Lifesmart vs. Alternative Asset Allocation | Franklin Lifesmart vs. T Rowe Price | Franklin Lifesmart vs. Aqr Large Cap |
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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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