Correlation Between GM and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both GM and Franklin Lifesmart 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 GM and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Franklin Lifesmart 2030, you can compare the effects of market volatilities on GM and Franklin Lifesmart 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 GM with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Franklin Lifesmart.
Diversification Opportunities for GM and Franklin Lifesmart
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Franklin is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Franklin Lifesmart 2030 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2030 and GM 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 General Motors are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2030 has no effect on the direction of GM i.e., GM and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between GM and Franklin Lifesmart
Allowing for the 90-day total investment horizon General Motors is expected to generate 7.02 times more return on investment than Franklin Lifesmart. However, GM is 7.02 times more volatile than Franklin Lifesmart 2030. It trades about 0.17 of its potential returns per unit of risk. Franklin Lifesmart 2030 is currently generating about 0.31 per unit of risk. If you would invest 5,076 in General Motors on September 1, 2024 and sell it today you would earn a total of 483.00 from holding General Motors or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
General Motors vs. Franklin Lifesmart 2030
Performance |
| Timeline |
| General Motors |
| Franklin Lifesmart 2030 |
GM and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Franklin Lifesmart
The main advantage of trading using opposite GM and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Franklin Lifesmart 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 Franklin Lifesmart will offset losses from the drop in Franklin Lifesmart's long position.The idea behind General Motors and Franklin Lifesmart 2030 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.| Franklin Lifesmart vs. Baron Health Care | Franklin Lifesmart vs. Blackrock Health Sciences | Franklin Lifesmart vs. Highland Longshort Healthcare | Franklin Lifesmart vs. Invesco Global 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |