Correlation Between IShares Short and Franklin Liberty
Can any of the company-specific risk be diversified away by investing in both IShares Short 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 Short 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 Short Maturity and Franklin Liberty Federal, you can compare the effects of market volatilities on IShares Short 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 Short with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Short and Franklin Liberty.
Diversification Opportunities for IShares Short and Franklin Liberty
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between IShares and Franklin is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Maturity and Franklin Liberty Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Federal and IShares Short 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 Short Maturity 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 Federal has no effect on the direction of IShares Short i.e., IShares Short and Franklin Liberty go up and down completely randomly.
Pair Corralation between IShares Short and Franklin Liberty
Given the investment horizon of 90 days IShares Short is expected to generate 1.92 times less return on investment than Franklin Liberty. But when comparing it to its historical volatility, iShares Short Maturity is 4.57 times less risky than Franklin Liberty. It trades about 0.22 of its potential returns per unit of risk. Franklin Liberty Federal is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,395 in Franklin Liberty Federal on August 27, 2024 and sell it today you would earn a total of 19.00 from holding Franklin Liberty Federal or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Short Maturity vs. Franklin Liberty Federal
Performance |
| Timeline |
| iShares Short Maturity |
| Franklin Liberty Federal |
IShares Short and Franklin Liberty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Short and Franklin Liberty
The main advantage of trading using opposite IShares Short and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Short 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 Short vs. iShares Treasury Floating | IShares Short vs. iShares Short Term National | IShares Short vs. iShares Short Maturity | IShares Short vs. iShares Interest Rate |
| Franklin Liberty vs. Franklin Liberty Intermediate | Franklin Liberty vs. Hartford Municipal Opportunities | Franklin Liberty vs. IQ MacKay Municipal |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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