Correlation Between Franklin Templeton and MicroSectors FANG

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

Diversification Opportunities for Franklin Templeton and MicroSectors FANG

0.35

Correlation Coefficient

Franklin Templeton  MicroSectors FANG

Weak diversification

The 3 months correlation between Franklin and MicroSectors is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Templeton ETF and MicroSectors FANG ETN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG ETN 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 MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG ETN has no effect on the direction of Franklin Templeton i.e., Franklin Templeton and MicroSectors FANG go up and down completely randomly.

Pair Corralation between Franklin Templeton and MicroSectors FANG

Given the investment horizon of 90 days Franklin Templeton ETF is expected to generate 0.49 times more return on investment than MicroSectors FANG. However, Franklin Templeton ETF is 2.04 times less risky than MicroSectors FANG. It trades about -0.01 of its potential returns per unit of risk. MicroSectors FANG ETN is currently generating about -0.03 per unit of risk. If you would invest  2,691  in Franklin Templeton ETF on December 4, 2024 and sell it today you would lose (26.00) from holding Franklin Templeton ETF or give up 0.97% of portfolio value over 90 days.

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

Franklin Templeton ETF  vs.  MicroSectors FANG ETN

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.

MicroSectors FANG ETN

Risk-Adjusted Performance

Very Weak

Over the last 90 days MicroSectors FANG ETN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, MicroSectors FANG is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Franklin Templeton and MicroSectors FANG

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

The idea behind Franklin Templeton ETF and MicroSectors FANG ETN 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.