Correlation Between Franklin Lifesmart and Moderately Aggressive
Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart and Moderately Aggressive 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 Moderately Aggressive 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 Moderately Aggressive Balanced, you can compare the effects of market volatilities on Franklin Lifesmart and Moderately Aggressive 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 Moderately Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Moderately Aggressive.
Diversification Opportunities for Franklin Lifesmart and Moderately Aggressive
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Moderately is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart Retirement and Moderately Aggressive Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderately Aggressive 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 Moderately Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderately Aggressive has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Moderately Aggressive go up and down completely randomly.
Pair Corralation between Franklin Lifesmart and Moderately Aggressive
Assuming the 90 days horizon Franklin Lifesmart is expected to generate 1.67 times less return on investment than Moderately Aggressive. But when comparing it to its historical volatility, Franklin Lifesmart Retirement is 1.69 times less risky than Moderately Aggressive. It trades about 0.12 of its potential returns per unit of risk. Moderately Aggressive Balanced is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,092 in Moderately Aggressive Balanced on August 28, 2024 and sell it today you would earn a total of 158.00 from holding Moderately Aggressive Balanced or generate 14.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.52% |
| Values | Daily Returns |
Franklin Lifesmart Retirement vs. Moderately Aggressive Balanced
Performance |
| Timeline |
| Franklin Lifesmart |
| Moderately Aggressive |
Franklin Lifesmart and Moderately Aggressive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Lifesmart and Moderately Aggressive
The main advantage of trading using opposite Franklin Lifesmart and Moderately Aggressive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart position performs unexpectedly, Moderately Aggressive 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 Moderately Aggressive will offset losses from the drop in Moderately Aggressive's long position.The idea behind Franklin Lifesmart Retirement and Moderately Aggressive Balanced 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.
| Moderately Aggressive vs. Goldman Sachs Financial | Moderately Aggressive vs. Mesirow Financial Small | Moderately Aggressive vs. Vanguard Financials Index | Moderately Aggressive vs. Gabelli Global Financial |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |