Correlation Between Snap and Franklin Liberty
Can any of the company-specific risk be diversified away by investing in both Snap and Franklin Liberty 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 Snap and Franklin Liberty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Franklin Liberty International, you can compare the effects of market volatilities on Snap and Franklin Liberty 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 Snap with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Franklin Liberty.
Diversification Opportunities for Snap and Franklin Liberty
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Snap and Franklin is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Franklin Liberty International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Int and Snap 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 Snap Inc are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Int has no effect on the direction of Snap i.e., Snap and Franklin Liberty go up and down completely randomly.
Pair Corralation between Snap and Franklin Liberty
Given the investment horizon of 90 days Snap Inc is expected to generate 20.69 times more return on investment than Franklin Liberty. However, Snap is 20.69 times more volatile than Franklin Liberty International. It trades about 0.1 of its potential returns per unit of risk. Franklin Liberty International is currently generating about 0.12 per unit of risk. If you would invest 1,071 in Snap Inc on August 28, 2024 and sell it today you would earn a total of 89.00 from holding Snap Inc or generate 8.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Franklin Liberty International
Performance |
| Timeline |
| Snap Inc |
| Franklin Liberty Int |
Snap and Franklin Liberty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Franklin Liberty
The main advantage of trading using opposite Snap and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Franklin Liberty 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 Liberty will offset losses from the drop in Franklin Liberty's long position.The idea behind Snap Inc and Franklin Liberty International 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 Liberty vs. Franklin Liberty High | Franklin Liberty vs. Franklin Liberty Senior | Franklin Liberty vs. Franklin Liberty Intermediate | Franklin Liberty vs. Franklin Liberty Short |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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