Correlation Between NYSE Composite and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Franklin Lifesmart 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 NYSE Composite and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Franklin Lifesmart Retirement, you can compare the effects of market volatilities on NYSE Composite and Franklin Lifesmart 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 NYSE Composite with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Franklin Lifesmart.
Diversification Opportunities for NYSE Composite and Franklin Lifesmart
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Franklin is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Franklin Lifesmart Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart and NYSE Composite 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 NYSE Composite are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart has no effect on the direction of NYSE Composite i.e., NYSE Composite and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between NYSE Composite and Franklin Lifesmart
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.26 times more return on investment than Franklin Lifesmart. However, NYSE Composite is 2.26 times more volatile than Franklin Lifesmart Retirement. It trades about 0.14 of its potential returns per unit of risk. Franklin Lifesmart Retirement is currently generating about -0.01 per unit of risk. If you would invest 1,950,122 in NYSE Composite on August 28, 2024 and sell it today you would earn a total of 71,823 from holding NYSE Composite or generate 3.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Franklin Lifesmart Retirement
Performance |
| Timeline |
NYSE Composite and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Franklin Lifesmart Retirement
Pair trading matchups for Franklin Lifesmart
Pair Trading with NYSE Composite and Franklin Lifesmart
The main advantage of trading using opposite NYSE Composite and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Franklin Lifesmart 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 Lifesmart will offset losses from the drop in Franklin Lifesmart's long position.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| Franklin Lifesmart vs. Franklin Mutual Beacon | Franklin Lifesmart vs. Templeton Developing Markets | Franklin Lifesmart vs. Franklin Mutual Global | Franklin Lifesmart vs. Franklin Mutual 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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