Correlation Between Franklin International and First Trust
Can any of the company-specific risk be diversified away by investing in both Franklin International 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 International 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 International Low and First Trust Rising, you can compare the effects of market volatilities on Franklin International 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 International with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin International and First Trust.
Diversification Opportunities for Franklin International and First Trust
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and First is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Franklin International Low and First Trust Rising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Rising and Franklin International 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 International Low 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 Rising has no effect on the direction of Franklin International i.e., Franklin International and First Trust go up and down completely randomly.
Pair Corralation between Franklin International and First Trust
Given the investment horizon of 90 days Franklin International is expected to generate 1.39 times less return on investment than First Trust. But when comparing it to its historical volatility, Franklin International Low is 1.61 times less risky than First Trust. It trades about 0.11 of its potential returns per unit of risk. First Trust Rising is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,825 in First Trust Rising on August 29, 2024 and sell it today you would earn a total of 1,581 from holding First Trust Rising or generate 32.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin International Low vs. First Trust Rising
Performance |
| Timeline |
| Franklin International |
| First Trust Rising |
Franklin International and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin International and First Trust
The main advantage of trading using opposite Franklin International and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin International 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 International vs. Legg Mason Low | Franklin International vs. Xtrackers MSCI EAFE | Franklin International vs. Invesco SP SmallCap | Franklin International vs. WisdomTree International Hedged |
| First Trust vs. First Trust Capital | First Trust vs. First Trust Value | First Trust vs. First Trust SMID | First Trust vs. First Trust Global |
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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