Correlation Between Astar and Franklin LibertyQ

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

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

Diversification Opportunities for Astar and Franklin LibertyQ

0.75

Correlation Coefficient

Astar  Franklin LibertyQ

Poor diversification

The 3 months correlation between Astar and Franklin is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Astar and Franklin LibertyQ Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin LibertyQ Small and Astar 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 Astar 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 Small has no effect on the direction of Astar i.e., Astar and Franklin LibertyQ go up and down completely randomly.

Pair Corralation between Astar and Franklin LibertyQ

Assuming the 90 days trading horizon Astar is expected to generate 4.3 times more return on investment than Franklin LibertyQ. However, Astar is 4.3 times more volatile than Franklin LibertyQ Small. It trades about 0.03 of its potential returns per unit of risk. Franklin LibertyQ Small is currently generating about 0.0 per unit of risk. If you would invest  6.01  in Astar on October 11, 2024 and sell it today you would earn a total of  0.11  from holding Astar or generate 1.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Astar  vs.  Franklin LibertyQ Small

Astar

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Astar may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Franklin LibertyQ Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin LibertyQ Small has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Franklin LibertyQ is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Astar and Franklin LibertyQ

The main advantage of trading using opposite Astar and Franklin LibertyQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astar 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 Astar and Franklin LibertyQ Small 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.