Correlation Between Principal Lifetime and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Principal Lifetime 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 Principal Lifetime and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Principal Lifetime Hybrid and Franklin Lifesmart 2055, you can compare the effects of market volatilities on Principal Lifetime 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 Principal Lifetime with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Lifetime and Franklin Lifesmart.
Diversification Opportunities for Principal Lifetime and Franklin Lifesmart
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Principal and Franklin is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Principal Lifetime Hybrid and Franklin Lifesmart 2055 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2055 and Principal Lifetime 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 Principal Lifetime Hybrid 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 2055 has no effect on the direction of Principal Lifetime i.e., Principal Lifetime and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Principal Lifetime and Franklin Lifesmart
Assuming the 90 days horizon Principal Lifetime Hybrid is expected to generate 0.96 times more return on investment than Franklin Lifesmart. However, Principal Lifetime Hybrid is 1.04 times less risky than Franklin Lifesmart. It trades about 0.08 of its potential returns per unit of risk. Franklin Lifesmart 2055 is currently generating about 0.07 per unit of risk. If you would invest 1,807 in Principal Lifetime Hybrid on September 12, 2024 and sell it today you would earn a total of 12.00 from holding Principal Lifetime Hybrid or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Principal Lifetime Hybrid vs. Franklin Lifesmart 2055
Performance |
| Timeline |
| Principal Lifetime Hybrid |
| Franklin Lifesmart 2055 |
Principal Lifetime and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Principal Lifetime and Franklin Lifesmart
The main advantage of trading using opposite Principal Lifetime and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Lifetime 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.| Principal Lifetime vs. Scharf Global Opportunity | Principal Lifetime vs. Arrow Managed Futures | Principal Lifetime vs. T Rowe Price | Principal Lifetime vs. Volumetric Fund Volumetric |
| Franklin Lifesmart vs. Goldman Sachs Inflation | Franklin Lifesmart vs. Ab Bond Inflation | Franklin Lifesmart vs. Lord Abbett Inflation | Franklin Lifesmart vs. Simt Multi Asset Inflation |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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