Correlation Between IShares MBS and Franklin Liberty
Can any of the company-specific risk be diversified away by investing in both IShares MBS 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 IShares MBS and Franklin Liberty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MBS ETF and Franklin Liberty Treasury, you can compare the effects of market volatilities on IShares MBS 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 IShares MBS with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MBS and Franklin Liberty.
Diversification Opportunities for IShares MBS and Franklin Liberty
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and Franklin is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares MBS ETF and Franklin Liberty Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Treasury and IShares MBS 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 MBS ETF 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 Treasury has no effect on the direction of IShares MBS i.e., IShares MBS and Franklin Liberty go up and down completely randomly.
Pair Corralation between IShares MBS and Franklin Liberty
Considering the 90-day investment horizon iShares MBS ETF is expected to generate 1.23 times more return on investment than Franklin Liberty. However, IShares MBS is 1.23 times more volatile than Franklin Liberty Treasury. It trades about 0.12 of its potential returns per unit of risk. Franklin Liberty Treasury is currently generating about 0.04 per unit of risk. If you would invest 9,249 in iShares MBS ETF on August 27, 2024 and sell it today you would earn a total of 96.00 from holding iShares MBS ETF or generate 1.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MBS ETF vs. Franklin Liberty Treasury
Performance |
| Timeline |
| iShares MBS ETF |
| Franklin Liberty Treasury |
IShares MBS and Franklin Liberty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MBS and Franklin Liberty
The main advantage of trading using opposite IShares MBS and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MBS 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.| IShares MBS vs. iShares 3 7 Year | IShares MBS vs. iShares JP Morgan | IShares MBS vs. iShares Intermediate GovernmentCredit | IShares MBS vs. iShares National Muni |
| Franklin Liberty vs. Franklin Templeton ETF | Franklin Liberty vs. Franklin Liberty Investment | Franklin Liberty vs. Franklin Liberty International | Franklin Liberty vs. Franklin Liberty Intermediate |
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 Channel module to use Commodity Channel Index to analyze current equity momentum.
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