Correlation Between Fidelity Series and Franklin Lifesmart

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

By analyzing existing cross correlation between Fidelity Series Canada and Franklin Lifesmart Retirement, you can compare the effects of market volatilities on Fidelity Series and Franklin Lifesmart 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 Fidelity Series with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Series and Franklin Lifesmart.

Diversification Opportunities for Fidelity Series and Franklin Lifesmart

0.69

Correlation Coefficient

Fidelity Series  Franklin Lifesmart

Poor diversification

The 3 months correlation between Fidelity and Franklin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Series Canada and Franklin Lifesmart Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart and Fidelity Series 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 Fidelity Series Canada are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart has no effect on the direction of Fidelity Series i.e., Fidelity Series and Franklin Lifesmart go up and down completely randomly.

Pair Corralation between Fidelity Series and Franklin Lifesmart

Assuming the 90 days horizon Fidelity Series Canada is expected to generate 2.46 times more return on investment than Franklin Lifesmart. However, Fidelity Series is 2.46 times more volatile than Franklin Lifesmart Retirement. It trades about 0.09 of its potential returns per unit of risk. Franklin Lifesmart Retirement is currently generating about 0.04 per unit of risk. If you would invest  1,619  in Fidelity Series Canada on September 14, 2024 and sell it today you would earn a total of  55.00  from holding Fidelity Series Canada or generate 3.4% return on investment over 90 days.

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

Fidelity Series Canada  vs.  Franklin Lifesmart Retirement

Fidelity Series Canada

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Series Canada are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Lifesmart

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Lifesmart Retirement are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Franklin Lifesmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Series and Franklin Lifesmart

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

The idea behind Fidelity Series Canada and Franklin Lifesmart Retirement 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.