Correlation Between Moderate Balanced and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Moderate Balanced 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 Moderate Balanced and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Moderate Balanced Allocation and Franklin Lifesmart 2030, you can compare the effects of market volatilities on Moderate Balanced 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 Moderate Balanced with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderate Balanced and Franklin Lifesmart.
Diversification Opportunities for Moderate Balanced and Franklin Lifesmart
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Moderate and Franklin is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Balanced Allocation and Franklin Lifesmart 2030 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2030 and Moderate Balanced 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 Moderate Balanced Allocation 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 2030 has no effect on the direction of Moderate Balanced i.e., Moderate Balanced and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Moderate Balanced and Franklin Lifesmart
Assuming the 90 days horizon Moderate Balanced Allocation is expected to generate 1.07 times more return on investment than Franklin Lifesmart. However, Moderate Balanced is 1.07 times more volatile than Franklin Lifesmart 2030. It trades about 0.26 of its potential returns per unit of risk. Franklin Lifesmart 2030 is currently generating about 0.25 per unit of risk. If you would invest 1,169 in Moderate Balanced Allocation on November 3, 2024 and sell it today you would earn a total of 37.00 from holding Moderate Balanced Allocation or generate 3.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Moderate Balanced Allocation vs. Franklin Lifesmart 2030
Performance |
| Timeline |
| Moderate Balanced |
| Franklin Lifesmart 2030 |
Moderate Balanced and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Moderate Balanced and Franklin Lifesmart
The main advantage of trading using opposite Moderate Balanced and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moderate Balanced 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.| Moderate Balanced vs. Needham Aggressive Growth | Moderate Balanced vs. Gugg Actv Invmt | Moderate Balanced vs. Lgm Risk Managed | Moderate Balanced vs. The Hartford High |
| 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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