Correlation Between Global Infrastructure and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Global Infrastructure 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 Global Infrastructure and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Infrastructure Fund and Franklin Lifesmart Retirement, you can compare the effects of market volatilities on Global Infrastructure 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 Global Infrastructure with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Infrastructure and Franklin Lifesmart.
Diversification Opportunities for Global Infrastructure and Franklin Lifesmart
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and FRANKLIN is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Global Infrastructure Fund and Franklin Lifesmart Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart and Global Infrastructure 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 Global Infrastructure Fund 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 Global Infrastructure i.e., Global Infrastructure and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Global Infrastructure and Franklin Lifesmart
Assuming the 90 days horizon Global Infrastructure Fund is expected to generate 1.96 times more return on investment than Franklin Lifesmart. However, Global Infrastructure is 1.96 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 0.16 per unit of risk. If you would invest 887.00 in Global Infrastructure Fund on September 1, 2024 and sell it today you would earn a total of 100.00 from holding Global Infrastructure Fund or generate 11.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Global Infrastructure Fund vs. Franklin Lifesmart Retirement
Performance |
| Timeline |
| Global Infrastructure |
| Franklin Lifesmart |
Global Infrastructure and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Infrastructure and Franklin Lifesmart
The main advantage of trading using opposite Global Infrastructure and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Infrastructure 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.The idea behind Global Infrastructure Fund and Franklin Lifesmart Retirement 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.
| Franklin Lifesmart vs. Ft 7934 Corporate | Franklin Lifesmart vs. Calamos Dynamic Convertible | Franklin Lifesmart vs. Maryland Tax Free Bond | Franklin Lifesmart vs. Ms Global Fixed |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |