Correlation Between Xtrackers Harvest and Franklin FTSE

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

By analyzing existing cross correlation between Xtrackers Harvest CSI and Franklin FTSE Taiwan, you can compare the effects of market volatilities on Xtrackers Harvest and Franklin FTSE 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 Xtrackers Harvest with a short position of Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Harvest and Franklin FTSE.

Diversification Opportunities for Xtrackers Harvest and Franklin FTSE

0.31

Correlation Coefficient

Xtrackers Harvest  Franklin FTSE

Weak diversification

The 3 months correlation between Xtrackers and Franklin is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Harvest CSI and Franklin FTSE Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Taiwan and Xtrackers Harvest 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 Xtrackers Harvest CSI are associated (or correlated) with Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Taiwan has no effect on the direction of Xtrackers Harvest i.e., Xtrackers Harvest and Franklin FTSE go up and down completely randomly.

Pair Corralation between Xtrackers Harvest and Franklin FTSE

Given the investment horizon of 90 days Xtrackers Harvest CSI is expected to generate 1.14 times more return on investment than Franklin FTSE. However, Xtrackers Harvest is 1.14 times more volatile than Franklin FTSE Taiwan. It trades about -0.01 of its potential returns per unit of risk. Franklin FTSE Taiwan is currently generating about -0.03 per unit of risk. If you would invest  2,690  in Xtrackers Harvest CSI on December 3, 2024 and sell it today you would lose (51.00) from holding Xtrackers Harvest CSI or give up 1.9% of portfolio value over 90 days.

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

Xtrackers Harvest CSI  vs.  Franklin FTSE Taiwan

Xtrackers Harvest CSI

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers Harvest CSI has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Xtrackers Harvest is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Franklin FTSE Taiwan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin FTSE Taiwan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Franklin FTSE is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Xtrackers Harvest and Franklin FTSE

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

The idea behind Xtrackers Harvest CSI and Franklin FTSE Taiwan 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.

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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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..