Correlation Between Franklin International and IShares AsiaPacific

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

By analyzing existing cross correlation between Franklin International Core and iShares AsiaPacific Dividend, you can compare the effects of market volatilities on Franklin International and IShares AsiaPacific 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 International with a short position of IShares AsiaPacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin International and IShares AsiaPacific.

Diversification Opportunities for Franklin International and IShares AsiaPacific

0.51

Correlation Coefficient

Franklin International  IShares AsiaPacific

Very weak diversification

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

Pair Corralation between Franklin International and IShares AsiaPacific

Given the investment horizon of 90 days Franklin International Core is expected to under-perform the IShares AsiaPacific. But the etf apears to be less risky and, when comparing its historical volatility, Franklin International Core is 1.22 times less risky than IShares AsiaPacific. The etf trades about -0.05 of its potential returns per unit of risk. The iShares AsiaPacific Dividend is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,649  in iShares AsiaPacific Dividend on September 12, 2024 and sell it today you would earn a total of  103.00  from holding iShares AsiaPacific Dividend or generate 2.82% return on investment over 90 days.

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

Franklin International Core  vs.  iShares AsiaPacific Dividend

Franklin International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin International Core has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Franklin International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

iShares AsiaPacific

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares AsiaPacific Dividend are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares AsiaPacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin International and IShares AsiaPacific

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

The idea behind Franklin International Core and iShares AsiaPacific Dividend 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.