Correlation Between Franklin Emerging and Inverse Nasdaq

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

By analyzing existing cross correlation between Franklin Emerging Market and Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on Franklin Emerging and Inverse Nasdaq 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 Emerging with a short position of Inverse Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Emerging and Inverse Nasdaq.

Diversification Opportunities for Franklin Emerging and Inverse Nasdaq

0.14

Correlation Coefficient

Franklin Emerging  Inverse Nasdaq

Average diversification

The 3 months correlation between Franklin and Inverse is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Emerging Market and Inverse Nasdaq 100 Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Nasdaq 100 and Franklin 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 Franklin Emerging Market are associated (or correlated) with Inverse Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Nasdaq 100 has no effect on the direction of Franklin Emerging i.e., Franklin Emerging and Inverse Nasdaq go up and down completely randomly.

Pair Corralation between Franklin Emerging and Inverse Nasdaq

Assuming the 90 days horizon Franklin Emerging Market is expected to under-perform the Inverse Nasdaq. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin Emerging Market is 1.3 times less risky than Inverse Nasdaq. The mutual fund trades about -0.26 of its potential returns per unit of risk. The Inverse Nasdaq 100 Strategy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,042  in Inverse Nasdaq 100 Strategy on October 12, 2024 and sell it today you would earn a total of  31.00  from holding Inverse Nasdaq 100 Strategy or generate 2.98% return on investment over 90 days.

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

Franklin Emerging Market  vs.  Inverse Nasdaq 100 Strategy

Franklin Emerging Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Emerging Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Franklin Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Inverse Nasdaq 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inverse Nasdaq 100 Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Inverse Nasdaq 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 Emerging and Inverse Nasdaq

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

The idea behind Franklin Emerging Market and Inverse Nasdaq 100 Strategy 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.