Correlation Between Ishares Aggregate and Franklin Convertible

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

By analyzing existing cross correlation between Ishares Aggregate Bond and Franklin Vertible Securities, you can compare the effects of market volatilities on Ishares Aggregate and Franklin Convertible 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 Ishares Aggregate with a short position of Franklin Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Aggregate and Franklin Convertible.

Diversification Opportunities for Ishares Aggregate and Franklin Convertible

0.09

Correlation Coefficient

Ishares Aggregate  Franklin Convertible

Significant diversification

The 3 months correlation between Ishares and Franklin is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Aggregate Bond and Franklin Vertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Convertible and Ishares Aggregate 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 Ishares Aggregate Bond are associated (or correlated) with Franklin Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Convertible has no effect on the direction of Ishares Aggregate i.e., Ishares Aggregate and Franklin Convertible go up and down completely randomly.

Pair Corralation between Ishares Aggregate and Franklin Convertible

Assuming the 90 days horizon Ishares Aggregate Bond is expected to generate 0.46 times more return on investment than Franklin Convertible. However, Ishares Aggregate Bond is 2.17 times less risky than Franklin Convertible. It trades about 0.07 of its potential returns per unit of risk. Franklin Vertible Securities is currently generating about -0.11 per unit of risk. If you would invest  886.00  in Ishares Aggregate Bond on December 12, 2024 and sell it today you would earn a total of  15.00  from holding Ishares Aggregate Bond or generate 1.69% return on investment over 90 days.

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

Ishares Aggregate Bond  vs.  Franklin Vertible Securities

Ishares Aggregate Bond

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Aggregate Bond are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ishares Aggregate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Convertible

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Vertible Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Ishares Aggregate and Franklin Convertible

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

The idea behind Ishares Aggregate Bond and Franklin Vertible Securities 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 CEOs Directory module to screen CEOs from public companies around the world.