Correlation Between Western Asset and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Smash and Franklin Lifesmart 2030, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Franklin Lifesmart.
Diversification Opportunities for Western Asset and Franklin Lifesmart
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Franklin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Smash 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 Western Asset 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 Western Asset Smash 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 Western Asset i.e., Western Asset and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Western Asset and Franklin Lifesmart
Assuming the 90 days horizon Western Asset is expected to generate 417.33 times less return on investment than Franklin Lifesmart. But when comparing it to its historical volatility, Western Asset Smash is 1.57 times less risky than Franklin Lifesmart. It trades about 0.0 of its potential returns per unit of risk. Franklin Lifesmart 2030 is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 1,406 in Franklin Lifesmart 2030 on September 1, 2024 and sell it today you would earn a total of 39.00 from holding Franklin Lifesmart 2030 or generate 2.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Smash vs. Franklin Lifesmart 2030
Performance |
| Timeline |
| Western Asset Smash |
| Franklin Lifesmart 2030 |
Western Asset and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Franklin Lifesmart
The main advantage of trading using opposite Western Asset and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. Federated Ultrashort Bond | Western Asset vs. Aqr Long Short Equity | Western Asset vs. Quantitative Longshort Equity | Western Asset vs. Touchstone Ultra Short |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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