Correlation Between Franklin Lifesmart and Towpath Technology
Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart and Towpath Technology 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 Towpath Technology 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 Towpath Technology, you can compare the effects of market volatilities on Franklin Lifesmart and Towpath Technology 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 Towpath Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Towpath Technology.
Diversification Opportunities for Franklin Lifesmart and Towpath Technology
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Towpath is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart Retirement and Towpath Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towpath Technology 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 Towpath Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towpath Technology has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Towpath Technology go up and down completely randomly.
Pair Corralation between Franklin Lifesmart and Towpath Technology
Assuming the 90 days horizon Franklin Lifesmart is expected to generate 1.28 times less return on investment than Towpath Technology. But when comparing it to its historical volatility, Franklin Lifesmart Retirement is 2.12 times less risky than Towpath Technology. It trades about 0.11 of its potential returns per unit of risk. Towpath Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,172 in Towpath Technology on September 2, 2024 and sell it today you would earn a total of 222.00 from holding Towpath Technology or generate 18.94% 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. Towpath Technology
Performance |
| Timeline |
| Franklin Lifesmart |
| Towpath Technology |
Franklin Lifesmart and Towpath Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Lifesmart and Towpath Technology
The main advantage of trading using opposite Franklin Lifesmart and Towpath Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart position performs unexpectedly, Towpath Technology 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 Towpath Technology will offset losses from the drop in Towpath Technology's long position.| Franklin Lifesmart vs. Champlain Small | Franklin Lifesmart vs. Baird Smallmid Cap | Franklin Lifesmart vs. Ab Small Cap | Franklin Lifesmart vs. The Hartford Small |
| Towpath Technology vs. Fundamental Large Cap | Towpath Technology vs. Large Cap Growth Profund | Towpath Technology vs. M Large Cap | Towpath Technology vs. John Hancock Investment |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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