Correlation Between Virtus and Franklin Liberty

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

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

Diversification Opportunities for Virtus and Franklin Liberty

0.65

Correlation Coefficient

Virtus  Franklin Liberty

Poor diversification

The 3 months correlation between Virtus and Franklin is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Virtus and Franklin Liberty Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Low and Virtus 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 Virtus are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Low has no effect on the direction of Virtus i.e., Virtus and Franklin Liberty go up and down completely randomly.

Pair Corralation between Virtus and Franklin Liberty

If you would invest  5,591  in Franklin Liberty Low on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Franklin Liberty Low or generate 0.0% return on investment over 90 days.

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

Virtus  vs.  Franklin Liberty Low

Virtus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Virtus is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Franklin Liberty Low

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Liberty Low has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Franklin Liberty 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 Virtus and Franklin Liberty

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

The idea behind Virtus and Franklin Liberty Low 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.