Correlation Between Visa and Franklin Liberty
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Franklin Liberty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Franklin Liberty Intermediate, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Franklin Liberty.
Diversification Opportunities for Visa and Franklin Liberty
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Visa and Franklin is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Franklin Liberty Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Int and Visa 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 Visa Class A 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 Visa i.e., Visa and Franklin Liberty go up and down completely randomly.
Pair Corralation between Visa and Franklin Liberty
Taking into account the 90-day investment horizon Visa Class A is expected to generate 2.7 times more return on investment than Franklin Liberty. However, Visa is 2.7 times more volatile than Franklin Liberty Intermediate. It trades about 0.33 of its potential returns per unit of risk. Franklin Liberty Intermediate is currently generating about 0.22 per unit of risk. If you would invest 28,960 in Visa Class A on August 31, 2024 and sell it today you would earn a total of 2,548 from holding Visa Class A or generate 8.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Franklin Liberty Intermediate
Performance |
| Timeline |
| Visa Class A |
| Franklin Liberty Int |
Visa and Franklin Liberty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Franklin Liberty
The main advantage of trading using opposite Visa and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Franklin Liberty vs. Franklin Liberty Federal | Franklin Liberty vs. Hartford Municipal Opportunities | Franklin Liberty vs. IQ MacKay Municipal | Franklin Liberty vs. First Trust Municipal |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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