Correlation Between Franklin Lifesmart and Sierra E
Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart and Sierra E 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 Sierra E 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 Sierra E Retirement, you can compare the effects of market volatilities on Franklin Lifesmart and Sierra E 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 Sierra E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Sierra E.
Diversification Opportunities for Franklin Lifesmart and Sierra E
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Sierra is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart Retirement and Sierra E Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra E Retirement 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 Sierra E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra E Retirement has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Sierra E go up and down completely randomly.
Pair Corralation between Franklin Lifesmart and Sierra E
Assuming the 90 days horizon Franklin Lifesmart Retirement is expected to generate 0.95 times more return on investment than Sierra E. However, Franklin Lifesmart Retirement is 1.05 times less risky than Sierra E. It trades about 0.07 of its potential returns per unit of risk. Sierra E Retirement is currently generating about 0.06 per unit of risk. If you would invest 1,059 in Franklin Lifesmart Retirement on September 13, 2024 and sell it today you would earn a total of 8.00 from holding Franklin Lifesmart Retirement or generate 0.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Lifesmart Retirement vs. Sierra E Retirement
Performance |
| Timeline |
| Franklin Lifesmart |
| Sierra E Retirement |
Franklin Lifesmart and Sierra E Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Lifesmart and Sierra E
The main advantage of trading using opposite Franklin Lifesmart and Sierra E positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart position performs unexpectedly, Sierra E 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 Sierra E will offset losses from the drop in Sierra E's long position.| Franklin Lifesmart vs. Franklin Mutual Beacon | Franklin Lifesmart vs. Templeton Developing Markets | Franklin Lifesmart vs. Franklin Mutual Global | Franklin Lifesmart vs. Franklin Mutual Global |
| Sierra E vs. Sierra Tactical Risk | Sierra E vs. Sierra Strategic Income | Sierra E vs. Sierra Strategic Income | Sierra E vs. Sierra Strategic Income |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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