Correlation Between Franklin Lifesmart and State Farm
Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart and State Farm 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 State Farm 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 State Farm Balanced, you can compare the effects of market volatilities on Franklin Lifesmart and State Farm 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 State Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and State Farm.
Diversification Opportunities for Franklin Lifesmart and State Farm
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and State is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart Retirement and State Farm Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Farm Balanced 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 State Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Farm Balanced has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and State Farm go up and down completely randomly.
Pair Corralation between Franklin Lifesmart and State Farm
Assuming the 90 days horizon Franklin Lifesmart Retirement is expected to generate 0.45 times more return on investment than State Farm. However, Franklin Lifesmart Retirement is 2.21 times less risky than State Farm. It trades about 0.1 of its potential returns per unit of risk. State Farm Balanced is currently generating about 0.03 per unit of risk. If you would invest 967.00 in Franklin Lifesmart Retirement on October 22, 2024 and sell it today you would earn a total of 74.00 from holding Franklin Lifesmart Retirement or generate 7.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Lifesmart Retirement vs. State Farm Balanced
Performance |
| Timeline |
| Franklin Lifesmart |
| State Farm Balanced |
Franklin Lifesmart and State Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Lifesmart and State Farm
The main advantage of trading using opposite Franklin Lifesmart and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart position performs unexpectedly, State Farm 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 State Farm will offset losses from the drop in State Farm's long position.| Franklin Lifesmart vs. Virtus Multi Sector Short | Franklin Lifesmart vs. Transam Short Term Bond | Franklin Lifesmart vs. Transamerica Short Term Bond | Franklin Lifesmart vs. Leader Short Term Bond |
| State Farm vs. Highland Longshort Healthcare | State Farm vs. Eventide Healthcare Life | State Farm vs. Allianzgi Health Sciences | State Farm vs. Lord Abbett Health |
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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