Correlation Between First Trust and Franklin International

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

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

Diversification Opportunities for First Trust and Franklin International

0.51

Correlation Coefficient

First Trust  Franklin International

Very weak diversification

The 3 months correlation between First and Franklin is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Intl and Franklin International Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin International and First Trust 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 First Trust Intl 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 First Trust i.e., First Trust and Franklin International go up and down completely randomly.

Pair Corralation between First Trust and Franklin International

Considering the 90-day investment horizon First Trust is expected to generate 1.35 times less return on investment than Franklin International. But when comparing it to its historical volatility, First Trust Intl is 1.07 times less risky than Franklin International. It trades about 0.05 of its potential returns per unit of risk. Franklin International Core is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,589  in Franklin International Core on December 3, 2024 and sell it today you would earn a total of  644.00  from holding Franklin International Core or generate 24.87% return on investment over 90 days.

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

First Trust Intl  vs.  Franklin International Core

First Trust Intl

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Intl has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, First Trust is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Franklin International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin International Core are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with First Trust and Franklin International

The main advantage of trading using opposite First Trust and Franklin International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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 First Trust Intl and Franklin International Core 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.