Correlation Between Lifex Inflation-protec and Franklin Moderate
Can any of the company-specific risk be diversified away by investing in both Lifex Inflation-protec and Franklin Moderate 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 Lifex Inflation-protec and Franklin Moderate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifex Inflation Protected Income and Franklin Moderate Allocation, you can compare the effects of market volatilities on Lifex Inflation-protec and Franklin Moderate 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 Lifex Inflation-protec with a short position of Franklin Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifex Inflation-protec and Franklin Moderate.
Diversification Opportunities for Lifex Inflation-protec and Franklin Moderate
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lifex and Franklin is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lifex Inflation Protected Inco and Franklin Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Moderate and Lifex Inflation-protec 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 Lifex Inflation Protected Income are associated (or correlated) with Franklin Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Moderate has no effect on the direction of Lifex Inflation-protec i.e., Lifex Inflation-protec and Franklin Moderate go up and down completely randomly.
Pair Corralation between Lifex Inflation-protec and Franklin Moderate
Assuming the 90 days horizon Lifex Inflation-protec is expected to generate 1.37 times less return on investment than Franklin Moderate. But when comparing it to its historical volatility, Lifex Inflation Protected Income is 1.43 times less risky than Franklin Moderate. It trades about 0.13 of its potential returns per unit of risk. Franklin Moderate Allocation is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,509 in Franklin Moderate Allocation on September 1, 2024 and sell it today you would earn a total of 120.00 from holding Franklin Moderate Allocation or generate 7.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.64% |
| Values | Daily Returns |
Lifex Inflation Protected Inco vs. Franklin Moderate Allocation
Performance |
| Timeline |
| Lifex Inflation-protec |
| Franklin Moderate |
Lifex Inflation-protec and Franklin Moderate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifex Inflation-protec and Franklin Moderate
The main advantage of trading using opposite Lifex Inflation-protec and Franklin Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifex Inflation-protec position performs unexpectedly, Franklin Moderate 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 Moderate will offset losses from the drop in Franklin Moderate's long position.The idea behind Lifex Inflation Protected Income and Franklin Moderate Allocation 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.
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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