Correlation Between ALPS Emerging and Franklin International

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

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

Diversification Opportunities for ALPS Emerging and Franklin International

0.39

Correlation Coefficient

ALPS Emerging  Franklin International

Weak diversification

The 3 months correlation between ALPS and Franklin is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding ALPS Emerging Sector and Franklin International Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin International and ALPS Emerging 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 ALPS Emerging Sector are associated (or correlated) with Franklin International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin International has no effect on the direction of ALPS Emerging i.e., ALPS Emerging and Franklin International go up and down completely randomly.

Pair Corralation between ALPS Emerging and Franklin International

Given the investment horizon of 90 days ALPS Emerging is expected to generate 1.91 times less return on investment than Franklin International. In addition to that, ALPS Emerging is 1.43 times more volatile than Franklin International Low. It trades about 0.04 of its total potential returns per unit of risk. Franklin International Low is currently generating about 0.12 per unit of volatility. If you would invest  2,516  in Franklin International Low on October 1, 2024 and sell it today you would earn a total of  519.00  from holding Franklin International Low or generate 20.63% return on investment over 90 days.

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

ALPS Emerging Sector  vs.  Franklin International Low

ALPS Emerging Sector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPS Emerging Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Franklin International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ALPS Emerging and Franklin International

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

The idea behind ALPS Emerging Sector and Franklin International Low 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.