Correlation Between Franklin Templeton and First Trust

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

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

Diversification Opportunities for Franklin Templeton and First Trust

0.09

Correlation Coefficient

Franklin Templeton  First Trust

Significant diversification

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

Pair Corralation between Franklin Templeton and First Trust

Given the investment horizon of 90 days Franklin Templeton is expected to generate 1.36 times less return on investment than First Trust. In addition to that, Franklin Templeton is 1.13 times more volatile than First Trust Exchange Traded. It trades about 0.06 of its total potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.1 per unit of volatility. If you would invest  1,960  in First Trust Exchange Traded on September 12, 2024 and sell it today you would earn a total of  551.00  from holding First Trust Exchange Traded or generate 28.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.9%
Values	Daily Returns

Franklin Templeton ETF  vs.  First Trust Exchange Traded

Franklin Templeton ETF

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Templeton ETF are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Franklin Templeton is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

First Trust Exchange

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Franklin Templeton and First Trust

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

The idea behind Franklin Templeton ETF and First Trust Exchange Traded 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.