Correlation Between Collaborative Investment and Franklin Liberty
Can any of the company-specific risk be diversified away by investing in both Collaborative Investment 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 Collaborative Investment and Franklin Liberty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Collaborative Investment Series and Franklin Liberty Systematic, you can compare the effects of market volatilities on Collaborative Investment 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 Collaborative Investment with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collaborative Investment and Franklin Liberty.
Diversification Opportunities for Collaborative Investment and Franklin Liberty
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Collaborative and Franklin is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Collaborative Investment Serie and Franklin Liberty Systematic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Sys and Collaborative Investment 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 Collaborative Investment Series 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 Sys has no effect on the direction of Collaborative Investment i.e., Collaborative Investment and Franklin Liberty go up and down completely randomly.
Pair Corralation between Collaborative Investment and Franklin Liberty
Given the investment horizon of 90 days Collaborative Investment Series is expected to generate 0.29 times more return on investment than Franklin Liberty. However, Collaborative Investment Series is 3.45 times less risky than Franklin Liberty. It trades about 0.12 of its potential returns per unit of risk. Franklin Liberty Systematic is currently generating about -0.02 per unit of risk. If you would invest 2,196 in Collaborative Investment Series on September 12, 2024 and sell it today you would earn a total of 10.00 from holding Collaborative Investment Series or generate 0.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Collaborative Investment Serie vs. Franklin Liberty Systematic
Performance |
| Timeline |
| Collaborative Investment |
| Franklin Liberty Sys |
Collaborative Investment and Franklin Liberty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Collaborative Investment and Franklin Liberty
The main advantage of trading using opposite Collaborative Investment and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collaborative Investment 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.The idea behind Collaborative Investment Series and Franklin Liberty Systematic 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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