Correlation Between Nasdaq 100 and Franklin Moderate
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and Franklin Moderate 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 Nasdaq 100 and Franklin Moderate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 2x Strategy and Franklin Moderate Allocation, you can compare the effects of market volatilities on Nasdaq 100 and Franklin Moderate 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 Nasdaq 100 with a short position of Franklin Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Franklin Moderate.
Diversification Opportunities for Nasdaq 100 and Franklin Moderate
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nasdaq and Franklin is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Franklin Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Moderate and Nasdaq 100 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 Nasdaq 100 2x Strategy are associated (or correlated) with Franklin Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Moderate has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Franklin Moderate go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Franklin Moderate
Assuming the 90 days horizon Nasdaq 100 2x Strategy is expected to generate 4.47 times more return on investment than Franklin Moderate. However, Nasdaq 100 is 4.47 times more volatile than Franklin Moderate Allocation. It trades about 0.12 of its potential returns per unit of risk. Franklin Moderate Allocation is currently generating about 0.11 per unit of risk. If you would invest 13,947 in Nasdaq 100 2x Strategy on September 13, 2024 and sell it today you would earn a total of 31,065 from holding Nasdaq 100 2x Strategy or generate 222.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Franklin Moderate Allocation
Performance |
| Timeline |
| Nasdaq 100 2x |
| Franklin Moderate |
Nasdaq 100 and Franklin Moderate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Franklin Moderate
The main advantage of trading using opposite Nasdaq 100 and Franklin Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, Franklin Moderate 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 Moderate will offset losses from the drop in Franklin Moderate's long position.| Nasdaq 100 vs. Lgm Risk Managed | Nasdaq 100 vs. Franklin High Income | Nasdaq 100 vs. Alliancebernstein Global High | Nasdaq 100 vs. Artisan High Income |
| Franklin Moderate vs. Nasdaq 100 2x Strategy | Franklin Moderate vs. Black Oak Emerging | Franklin Moderate vs. Mid Cap 15x Strategy | Franklin Moderate vs. Artisan Emerging Markets |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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