Correlation Between Vanguard Total and Franklin Liberty

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

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

Diversification Opportunities for Vanguard Total and Franklin Liberty

0.66

Correlation Coefficient

Vanguard Total  Franklin Liberty

Poor diversification

The 3 months correlation between Vanguard and Franklin is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total World and Franklin Liberty International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Int and Vanguard Total 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 Vanguard Total World 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 Int has no effect on the direction of Vanguard Total i.e., Vanguard Total and Franklin Liberty go up and down completely randomly.

Pair Corralation between Vanguard Total and Franklin Liberty

Given the investment horizon of 90 days Vanguard Total World is expected to under-perform the Franklin Liberty. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Total World is 1.0 times less risky than Franklin Liberty. The etf trades about -0.06 of its potential returns per unit of risk. The Franklin Liberty International is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,015  in Franklin Liberty International on September 18, 2024 and sell it today you would earn a total of  16.00  from holding Franklin Liberty International or generate 0.79% return on investment over 90 days.

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

Vanguard Total World  vs.  Franklin Liberty International

Vanguard Total World

Risk-Adjusted Performance

0 of 100

Very Weak

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

Franklin Liberty Int

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Total and Franklin Liberty

The main advantage of trading using opposite Vanguard Total and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Vanguard Total World and Franklin Liberty International 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.