Correlation Between Franklin Templeton and First Trust
Can any of the company-specific risk be diversified away by investing in both Franklin Templeton and First Trust 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 Templeton and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Templeton Multi Asset and First Trust Short, you can compare the effects of market volatilities on Franklin Templeton and First Trust 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 Templeton with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Templeton and First Trust.
Diversification Opportunities for Franklin Templeton and First Trust
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and First is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Templeton Multi Asset and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and Franklin Templeton 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 Templeton Multi Asset are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Short has no effect on the direction of Franklin Templeton i.e., Franklin Templeton and First Trust go up and down completely randomly.
Pair Corralation between Franklin Templeton and First Trust
Assuming the 90 days horizon Franklin Templeton is expected to generate 1.01 times less return on investment than First Trust. But when comparing it to its historical volatility, Franklin Templeton Multi Asset is 1.15 times less risky than First Trust. It trades about 0.21 of its potential returns per unit of risk. First Trust Short is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,674 in First Trust Short on September 2, 2024 and sell it today you would earn a total of 139.00 from holding First Trust Short or generate 8.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Templeton Multi Asset vs. First Trust Short
Performance |
| Timeline |
| Franklin Templeton |
| First Trust Short |
Franklin Templeton and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Templeton and First Trust
The main advantage of trading using opposite Franklin Templeton and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Templeton position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Franklin Templeton vs. First Trust Managed | Franklin Templeton vs. First Trust Short | Franklin Templeton vs. First Trust Short | Franklin Templeton vs. Vivaldi Merger Arbitrage |
| First Trust vs. Ab Global Risk | First Trust vs. Needham Aggressive Growth | First Trust vs. Federated Institutional High | First Trust vs. California High Yield Municipal |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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