Correlation Between Aqr Small and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Aqr Small 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 Aqr Small and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqr Small Cap and Franklin Lifesmart Retirement, you can compare the effects of market volatilities on Aqr Small 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 Aqr Small with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Small and Franklin Lifesmart.
Diversification Opportunities for Aqr Small and Franklin Lifesmart
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Aqr and Franklin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Small Cap and Franklin Lifesmart Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart and Aqr Small 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 Aqr Small Cap 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 Aqr Small i.e., Aqr Small and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Aqr Small and Franklin Lifesmart
Assuming the 90 days horizon Aqr Small Cap is expected to under-perform the Franklin Lifesmart. In addition to that, Aqr Small is 8.59 times more volatile than Franklin Lifesmart Retirement. It trades about -0.27 of its total potential returns per unit of risk. Franklin Lifesmart Retirement is currently generating about -0.31 per unit of volatility. If you would invest 1,085 in Franklin Lifesmart Retirement on October 9, 2024 and sell it today you would lose (30.00) from holding Franklin Lifesmart Retirement or give up 2.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqr Small Cap vs. Franklin Lifesmart Retirement
Performance |
| Timeline |
| Aqr Small Cap |
| Franklin Lifesmart |
Aqr Small and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqr Small and Franklin Lifesmart
The main advantage of trading using opposite Aqr Small and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Small 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.| Aqr Small vs. Aqr Large Cap | Aqr Small vs. Aqr Large Cap | Aqr Small vs. Aqr International Defensive | Aqr Small vs. Aqr International Defensive |
| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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