Correlation Between Mutual Quest and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Mutual Quest 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 Mutual Quest and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mutual Quest and Franklin Lifesmart 2020, you can compare the effects of market volatilities on Mutual Quest 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 Mutual Quest with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mutual Quest and Franklin Lifesmart.
Diversification Opportunities for Mutual Quest and Franklin Lifesmart
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mutual and Franklin is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Mutual Quest and Franklin Lifesmart 2020 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2020 and Mutual Quest 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 Mutual Quest 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 2020 has no effect on the direction of Mutual Quest i.e., Mutual Quest and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Mutual Quest and Franklin Lifesmart
Assuming the 90 days horizon Mutual Quest is expected to generate 1.24 times more return on investment than Franklin Lifesmart. However, Mutual Quest is 1.24 times more volatile than Franklin Lifesmart 2020. It trades about 0.11 of its potential returns per unit of risk. Franklin Lifesmart 2020 is currently generating about 0.1 per unit of risk. If you would invest 1,210 in Mutual Quest on September 2, 2024 and sell it today you would earn a total of 302.00 from holding Mutual Quest or generate 24.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mutual Quest vs. Franklin Lifesmart 2020
Performance |
| Timeline |
| Mutual Quest |
| Franklin Lifesmart 2020 |
Mutual Quest and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mutual Quest and Franklin Lifesmart
The main advantage of trading using opposite Mutual Quest and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mutual Quest 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.| Mutual Quest vs. Inflation Protected Bond Fund | Mutual Quest vs. Artisan High Income | Mutual Quest vs. Thrivent Income Fund | Mutual Quest vs. Maryland Tax Free Bond |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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