Correlation Between IShares Latin and Franklin FTSE
Can any of the company-specific risk be diversified away by investing in both IShares Latin and Franklin FTSE 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 IShares Latin and Franklin FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Latin America and Franklin FTSE Brazil, you can compare the effects of market volatilities on IShares Latin and Franklin FTSE 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 IShares Latin with a short position of Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Latin and Franklin FTSE.
Diversification Opportunities for IShares Latin and Franklin FTSE
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Franklin is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares Latin America and Franklin FTSE Brazil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Brazil and IShares Latin 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 iShares Latin America are associated (or correlated) with Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Brazil has no effect on the direction of IShares Latin i.e., IShares Latin and Franklin FTSE go up and down completely randomly.
Pair Corralation between IShares Latin and Franklin FTSE
Considering the 90-day investment horizon iShares Latin America is expected to under-perform the Franklin FTSE. But the etf apears to be less risky and, when comparing its historical volatility, iShares Latin America is 1.31 times less risky than Franklin FTSE. The etf trades about -0.21 of its potential returns per unit of risk. The Franklin FTSE Brazil is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 1,721 in Franklin FTSE Brazil on August 25, 2024 and sell it today you would lose (41.00) from holding Franklin FTSE Brazil or give up 2.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Latin America vs. Franklin FTSE Brazil
Performance |
| Timeline |
| iShares Latin America |
| Franklin FTSE Brazil |
IShares Latin and Franklin FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Latin and Franklin FTSE
The main advantage of trading using opposite IShares Latin and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Latin position performs unexpectedly, Franklin FTSE 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 FTSE will offset losses from the drop in Franklin FTSE's long position.| IShares Latin vs. iShares MSCI Mexico | IShares Latin vs. iShares MSCI Pacific | IShares Latin vs. iShares MSCI South | IShares Latin vs. iShares MSCI Brazil |
| Franklin FTSE vs. Franklin FTSE Mexico | Franklin FTSE vs. Franklin FTSE India | Franklin FTSE vs. Franklin FTSE South | Franklin FTSE vs. Franklin FTSE Japan |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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