Correlation Between Franklin Libertyshares and Aeorema Communications
Can any of the company-specific risk be diversified away by investing in both Franklin Libertyshares and Aeorema Communications 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 Franklin Libertyshares and Aeorema Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Libertyshares ICAV and Aeorema Communications Plc, you can compare the effects of market volatilities on Franklin Libertyshares and Aeorema Communications 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 Franklin Libertyshares with a short position of Aeorema Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Libertyshares and Aeorema Communications.
Diversification Opportunities for Franklin Libertyshares and Aeorema Communications
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Franklin and Aeorema is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Libertyshares ICAV and Aeorema Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeorema Communications and Franklin Libertyshares 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 Franklin Libertyshares ICAV are associated (or correlated) with Aeorema Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeorema Communications has no effect on the direction of Franklin Libertyshares i.e., Franklin Libertyshares and Aeorema Communications go up and down completely randomly.
Pair Corralation between Franklin Libertyshares and Aeorema Communications
Assuming the 90 days trading horizon Franklin Libertyshares ICAV is expected to generate 0.39 times more return on investment than Aeorema Communications. However, Franklin Libertyshares ICAV is 2.55 times less risky than Aeorema Communications. It trades about 0.06 of its potential returns per unit of risk. Aeorema Communications Plc is currently generating about -0.08 per unit of risk. If you would invest 2,504 in Franklin Libertyshares ICAV on September 12, 2024 and sell it today you would earn a total of 352.00 from holding Franklin Libertyshares ICAV or generate 14.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Libertyshares ICAV vs. Aeorema Communications Plc
Performance |
| Timeline |
| Franklin Libertyshares |
| Aeorema Communications |
Franklin Libertyshares and Aeorema Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Libertyshares and Aeorema Communications
The main advantage of trading using opposite Franklin Libertyshares and Aeorema Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Libertyshares position performs unexpectedly, Aeorema Communications 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 Aeorema Communications will offset losses from the drop in Aeorema Communications' long position.The idea behind Franklin Libertyshares ICAV and Aeorema Communications Plc 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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