Correlation Between Chestnut Street and Franklin Lifesmart

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

By analyzing existing cross correlation between Chestnut Street Exchange and Franklin Lifesmart 2035, you can compare the effects of market volatilities on Chestnut Street and Franklin Lifesmart 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 Chestnut Street with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chestnut Street and Franklin Lifesmart.

Diversification Opportunities for Chestnut Street and Franklin Lifesmart

0.7

Correlation Coefficient

Chestnut Street  Franklin Lifesmart

Poor diversification

The 3 months correlation between Chestnut and Franklin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Chestnut Street Exchange and Franklin Lifesmart 2035 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2035 and Chestnut Street 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 Chestnut Street Exchange are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2035 has no effect on the direction of Chestnut Street i.e., Chestnut Street and Franklin Lifesmart go up and down completely randomly.

Pair Corralation between Chestnut Street and Franklin Lifesmart

Assuming the 90 days horizon Chestnut Street is expected to generate 3.81 times less return on investment than Franklin Lifesmart. In addition to that, Chestnut Street is 1.19 times more volatile than Franklin Lifesmart 2035. It trades about 0.04 of its total potential returns per unit of risk. Franklin Lifesmart 2035 is currently generating about 0.19 per unit of volatility. If you would invest  1,505  in Franklin Lifesmart 2035 on September 19, 2024 and sell it today you would earn a total of  20.00  from holding Franklin Lifesmart 2035 or generate 1.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Chestnut Street Exchange  vs.  Franklin Lifesmart 2035

Chestnut Street Exchange

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chestnut Street Exchange are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Chestnut Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Lifesmart 2035

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Lifesmart 2035 are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Franklin Lifesmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chestnut Street and Franklin Lifesmart

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

The idea behind Chestnut Street Exchange and Franklin Lifesmart 2035 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.