Correlation Between Vanguard Target and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Vanguard Target 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 Vanguard Target and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Target Retirement and Franklin Lifesmart Retirement, you can compare the effects of market volatilities on Vanguard Target 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 Vanguard Target with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Target and Franklin Lifesmart.
Diversification Opportunities for Vanguard Target and Franklin Lifesmart
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Franklin is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Target Retirement and Franklin Lifesmart Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart and Vanguard Target 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 Vanguard Target Retirement 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 has no effect on the direction of Vanguard Target i.e., Vanguard Target and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Vanguard Target and Franklin Lifesmart
Assuming the 90 days horizon Vanguard Target Retirement is expected to under-perform the Franklin Lifesmart. In addition to that, Vanguard Target is 1.72 times more volatile than Franklin Lifesmart Retirement. It trades about -0.15 of its total potential returns per unit of risk. Franklin Lifesmart Retirement is currently generating about 0.12 per unit of volatility. If you would invest 1,057 in Franklin Lifesmart Retirement on October 25, 2024 and sell it today you would earn a total of 9.00 from holding Franklin Lifesmart Retirement or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Target Retirement vs. Franklin Lifesmart Retirement
Performance |
| Timeline |
| Vanguard Target Reti |
| Franklin Lifesmart |
Vanguard Target and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Target and Franklin Lifesmart
The main advantage of trading using opposite Vanguard Target and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Target 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.| Vanguard Target vs. California Municipal Portfolio | Vanguard Target vs. Ambrus Core Bond | Vanguard Target vs. Transamerica Intermediate Muni | Vanguard Target vs. Franklin Government Money |
| Franklin Lifesmart vs. Vanguard Target Retirement | Franklin Lifesmart vs. Blackrock Lifepath Idx | Franklin Lifesmart vs. Aquagold International | Franklin Lifesmart vs. Morningstar Unconstrained Allocation |
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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