Correlation Between Technology Select and Franklin Templeton
Can any of the company-specific risk be diversified away by investing in both Technology Select and Franklin Templeton 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 Technology Select and Franklin Templeton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Technology Select Sector and Franklin Templeton ETF, you can compare the effects of market volatilities on Technology Select and Franklin Templeton 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 Technology Select with a short position of Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Select and Franklin Templeton.
Diversification Opportunities for Technology Select and Franklin Templeton
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Technology and Franklin is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector and Franklin Templeton ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton ETF and Technology Select 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 Technology Select Sector are associated (or correlated) with Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton ETF has no effect on the direction of Technology Select i.e., Technology Select and Franklin Templeton go up and down completely randomly.
Pair Corralation between Technology Select and Franklin Templeton
Considering the 90-day investment horizon Technology Select is expected to generate 1.8 times less return on investment than Franklin Templeton. But when comparing it to its historical volatility, Technology Select Sector is 1.1 times less risky than Franklin Templeton. It trades about 0.08 of its potential returns per unit of risk. Franklin Templeton ETF is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 6,284 in Franklin Templeton ETF on August 26, 2024 and sell it today you would earn a total of 490.00 from holding Franklin Templeton ETF or generate 7.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Technology Select Sector vs. Franklin Templeton ETF
Performance |
| Timeline |
| Technology Select Sector |
| Franklin Templeton ETF |
Technology Select and Franklin Templeton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Technology Select and Franklin Templeton
The main advantage of trading using opposite Technology Select and Franklin Templeton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Select position performs unexpectedly, Franklin Templeton 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 Templeton will offset losses from the drop in Franklin Templeton's long position.| Technology Select vs. Invesco DWA Utilities | Technology Select vs. Invesco Dynamic Large | Technology Select vs. Invesco Dynamic Large | Technology Select vs. HUMANA INC |
| Franklin Templeton vs. Invesco DWA Utilities | Franklin Templeton vs. Invesco Dynamic Large | Franklin Templeton vs. Invesco Dynamic Large | Franklin Templeton vs. HUMANA INC |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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