Correlation Between FlexShares High and Franklin Liberty
Can any of the company-specific risk be diversified away by investing in both FlexShares High and Franklin Liberty 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 FlexShares High and Franklin Liberty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares High Yield and Franklin Liberty International, you can compare the effects of market volatilities on FlexShares High and Franklin Liberty 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 FlexShares High with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares High and Franklin Liberty.
Diversification Opportunities for FlexShares High and Franklin Liberty
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FlexShares and Franklin is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares High Yield and Franklin Liberty International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Int and FlexShares High 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 FlexShares High Yield are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Int has no effect on the direction of FlexShares High i.e., FlexShares High and Franklin Liberty go up and down completely randomly.
Pair Corralation between FlexShares High and Franklin Liberty
Given the investment horizon of 90 days FlexShares High Yield is expected to generate 0.95 times more return on investment than Franklin Liberty. However, FlexShares High Yield is 1.06 times less risky than Franklin Liberty. It trades about 0.29 of its potential returns per unit of risk. Franklin Liberty International is currently generating about 0.24 per unit of risk. If you would invest 4,084 in FlexShares High Yield on August 31, 2024 and sell it today you would earn a total of 58.00 from holding FlexShares High Yield or generate 1.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares High Yield vs. Franklin Liberty International
Performance |
| Timeline |
| FlexShares High Yield |
| Franklin Liberty Int |
FlexShares High and Franklin Liberty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares High and Franklin Liberty
The main advantage of trading using opposite FlexShares High and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares High position performs unexpectedly, Franklin Liberty 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 Liberty will offset losses from the drop in Franklin Liberty's long position.The idea behind FlexShares High Yield and Franklin Liberty International 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 Liberty vs. Franklin Liberty High | Franklin Liberty vs. Franklin Liberty Senior | Franklin Liberty vs. Franklin Liberty Intermediate | Franklin Liberty vs. Franklin Liberty Short |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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