Correlation Between Edinburgh Worldwide and Franklin Libertyshares

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

By analyzing existing cross correlation between Edinburgh Worldwide Investment and Franklin Libertyshares ICAV, you can compare the effects of market volatilities on Edinburgh Worldwide and Franklin Libertyshares 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 Edinburgh Worldwide with a short position of Franklin Libertyshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edinburgh Worldwide and Franklin Libertyshares.

Diversification Opportunities for Edinburgh Worldwide and Franklin Libertyshares

0.31

Correlation Coefficient

Edinburgh Worldwide  Franklin Libertyshares

Weak diversification

The 3 months correlation between Edinburgh and Franklin is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Edinburgh Worldwide Investment and Franklin Libertyshares ICAV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Libertyshares and Edinburgh Worldwide 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 Edinburgh Worldwide Investment are associated (or correlated) with Franklin Libertyshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Libertyshares has no effect on the direction of Edinburgh Worldwide i.e., Edinburgh Worldwide and Franklin Libertyshares go up and down completely randomly.

Pair Corralation between Edinburgh Worldwide and Franklin Libertyshares

Assuming the 90 days trading horizon Edinburgh Worldwide Investment is expected to generate 1.66 times more return on investment than Franklin Libertyshares. However, Edinburgh Worldwide is 1.66 times more volatile than Franklin Libertyshares ICAV. It trades about 0.31 of its potential returns per unit of risk. Franklin Libertyshares ICAV is currently generating about 0.09 per unit of risk. If you would invest  14,520  in Edinburgh Worldwide Investment on September 4, 2024 and sell it today you would earn a total of  4,380  from holding Edinburgh Worldwide Investment or generate 30.17% return on investment over 90 days.

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

Edinburgh Worldwide Investment  vs.  Franklin Libertyshares ICAV

Edinburgh Worldwide

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Edinburgh Worldwide Investment are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Edinburgh Worldwide exhibited solid returns over the last few months and may actually be approaching a breakup point.

Franklin Libertyshares

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Libertyshares ICAV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Franklin Libertyshares is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Edinburgh Worldwide and Franklin Libertyshares

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

The idea behind Edinburgh Worldwide Investment and Franklin Libertyshares ICAV 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.