Correlation Between Inverse Russell and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Inverse Russell 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 Inverse Russell and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Russell 2000 and Franklin Lifesmart Retirement, you can compare the effects of market volatilities on Inverse Russell 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 Inverse Russell with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Russell and Franklin Lifesmart.
Diversification Opportunities for Inverse Russell and Franklin Lifesmart
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Inverse and Franklin is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Russell 2000 and Franklin Lifesmart Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart and Inverse Russell 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 Inverse Russell 2000 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 Inverse Russell i.e., Inverse Russell and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Inverse Russell and Franklin Lifesmart
Assuming the 90 days horizon Inverse Russell 2000 is expected to under-perform the Franklin Lifesmart. In addition to that, Inverse Russell is 5.44 times more volatile than Franklin Lifesmart Retirement. It trades about -0.2 of its total potential returns per unit of risk. Franklin Lifesmart Retirement is currently generating about 0.13 per unit of volatility. If you would invest 1,052 in Franklin Lifesmart Retirement on August 29, 2024 and sell it today you would earn a total of 9.00 from holding Franklin Lifesmart Retirement or generate 0.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Russell 2000 vs. Franklin Lifesmart Retirement
Performance |
| Timeline |
| Inverse Russell 2000 |
| Franklin Lifesmart |
Inverse Russell and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Russell and Franklin Lifesmart
The main advantage of trading using opposite Inverse Russell and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Russell 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.| Inverse Russell vs. Franklin Lifesmart Retirement | Inverse Russell vs. Wisdomtree Siegel Moderate | Inverse Russell vs. Lifestyle Ii Moderate | Inverse Russell vs. Moderately Aggressive Balanced |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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