Correlation Between WisdomTree and Franklin LibertyQ

Can any of the company-specific risk be diversified away by investing in both WisdomTree and Franklin LibertyQ 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 WisdomTree and Franklin LibertyQ into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WisdomTree SP 500 and Franklin LibertyQ Equity, you can compare the effects of market volatilities on WisdomTree and Franklin LibertyQ 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 WisdomTree with a short position of Franklin LibertyQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree and Franklin LibertyQ.

Diversification Opportunities for WisdomTree and Franklin LibertyQ

0.91

Correlation Coefficient

WisdomTree  Franklin LibertyQ

Almost no diversification

The 3 months correlation between WisdomTree and Franklin is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SP 500 and Franklin LibertyQ Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin LibertyQ Equity and WisdomTree 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 WisdomTree SP 500 are associated (or correlated) with Franklin LibertyQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin LibertyQ Equity has no effect on the direction of WisdomTree i.e., WisdomTree and Franklin LibertyQ go up and down completely randomly.

Pair Corralation between WisdomTree and Franklin LibertyQ

Assuming the 90 days trading horizon WisdomTree SP 500 is expected to generate 3.12 times more return on investment than Franklin LibertyQ. However, WisdomTree is 3.12 times more volatile than Franklin LibertyQ Equity. It trades about 0.2 of its potential returns per unit of risk. Franklin LibertyQ Equity is currently generating about 0.22 per unit of risk. If you would invest  9,544  in WisdomTree SP 500 on September 5, 2024 and sell it today you would earn a total of  2,786  from holding WisdomTree SP 500 or generate 29.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

WisdomTree SP 500  vs.  Franklin LibertyQ Equity

WisdomTree SP 500

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SP 500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree unveiled solid returns over the last few months and may actually be approaching a breakup point.

Franklin LibertyQ Equity

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin LibertyQ Equity are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Franklin LibertyQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WisdomTree and Franklin LibertyQ

The main advantage of trading using opposite WisdomTree and Franklin LibertyQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree position performs unexpectedly, Franklin LibertyQ 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 LibertyQ will offset losses from the drop in Franklin LibertyQ's long position.

The idea behind WisdomTree SP 500 and Franklin LibertyQ Equity pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.