Correlation Between Franklin Templeton and ProShares Smart

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

Diversification Opportunities for Franklin Templeton and ProShares Smart

0.68

Correlation Coefficient

Franklin Templeton  ProShares Smart

Poor diversification

The 3 months correlation between Franklin and ProShares is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Templeton ETF and ProShares Smart Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Smart Materials 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 ProShares Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Smart Materials has no effect on the direction of Franklin Templeton i.e., Franklin Templeton and ProShares Smart go up and down completely randomly.

Pair Corralation between Franklin Templeton and ProShares Smart

Given the investment horizon of 90 days Franklin Templeton ETF is expected to generate 1.16 times more return on investment than ProShares Smart. However, Franklin Templeton is 1.16 times more volatile than ProShares Smart Materials. It trades about -0.08 of its potential returns per unit of risk. ProShares Smart Materials is currently generating about -0.23 per unit of risk. If you would invest  2,833  in Franklin Templeton ETF on September 13, 2024 and sell it today you would lose (95.00) from holding Franklin Templeton ETF or give up 3.35% of portfolio value over 90 days.

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

Franklin Templeton ETF  vs.  ProShares Smart Materials

Franklin Templeton ETF

Risk-Adjusted Performance

4 of 100

Insignificant

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.

ProShares Smart Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Smart Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ProShares Smart 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 ProShares Smart

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

The idea behind Franklin Templeton ETF and ProShares Smart Materials 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.