Correlation Between Franklin Templeton and Themes European

Can any of the company-specific risk be diversified away by investing in both Franklin Templeton and Themes European 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 Themes European 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 Themes European Luxury, you can compare the effects of market volatilities on Franklin Templeton and Themes European 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 Themes European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Templeton and Themes European.

Diversification Opportunities for Franklin Templeton and Themes European

0.51

Correlation Coefficient

Franklin Templeton  Themes European

Very weak diversification

The 3 months correlation between Franklin and Themes is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Templeton ETF and Themes European Luxury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes European Luxury 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 Themes European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes European Luxury has no effect on the direction of Franklin Templeton i.e., Franklin Templeton and Themes European go up and down completely randomly.

Pair Corralation between Franklin Templeton and Themes European

Given the investment horizon of 90 days Franklin Templeton is expected to generate 41.51 times less return on investment than Themes European. But when comparing it to its historical volatility, Franklin Templeton ETF is 1.34 times less risky than Themes European. It trades about 0.01 of its potential returns per unit of risk. Themes European Luxury is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,107  in Themes European Luxury on December 2, 2024 and sell it today you would earn a total of  257.00  from holding Themes European Luxury or generate 12.2% return on investment over 90 days.

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

Franklin Templeton ETF  vs.  Themes European Luxury

Franklin Templeton ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Templeton ETF has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Themes European Luxury

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Themes European Luxury are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Themes European may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Franklin Templeton and Themes European

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

The idea behind Franklin Templeton ETF and Themes European Luxury 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.