Correlation Between SPDR SP and Franklin LibertyQ
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Franklin LibertyQ 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 SPDR SP and Franklin LibertyQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 400 and Franklin LibertyQ Mid, you can compare the effects of market volatilities on SPDR SP and Franklin LibertyQ 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 SPDR SP with a short position of Franklin LibertyQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Franklin LibertyQ.
Diversification Opportunities for SPDR SP and Franklin LibertyQ
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and Franklin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 400 and Franklin LibertyQ Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin LibertyQ Mid and SPDR SP 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 SPDR SP 400 are associated (or correlated) with Franklin LibertyQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin LibertyQ Mid has no effect on the direction of SPDR SP i.e., SPDR SP and Franklin LibertyQ go up and down completely randomly.
Pair Corralation between SPDR SP and Franklin LibertyQ
Given the investment horizon of 90 days SPDR SP 400 is expected to generate 1.37 times more return on investment than Franklin LibertyQ. However, SPDR SP is 1.37 times more volatile than Franklin LibertyQ Mid. It trades about 0.28 of its potential returns per unit of risk. Franklin LibertyQ Mid is currently generating about 0.31 per unit of risk. If you would invest 8,712 in SPDR SP 400 on August 26, 2024 and sell it today you would earn a total of 636.00 from holding SPDR SP 400 or generate 7.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 400 vs. Franklin LibertyQ Mid
Performance |
| Timeline |
| SPDR SP 400 |
| Franklin LibertyQ Mid |
SPDR SP and Franklin LibertyQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Franklin LibertyQ
The main advantage of trading using opposite SPDR SP and Franklin LibertyQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Franklin LibertyQ 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 LibertyQ will offset losses from the drop in Franklin LibertyQ's long position.The idea behind SPDR SP 400 and Franklin LibertyQ Mid 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 LibertyQ vs. Vanguard Mid Cap Index | Franklin LibertyQ vs. Vanguard Extended Market | Franklin LibertyQ vs. iShares Core SP | Franklin LibertyQ vs. SPDR SP MIDCAP |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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