Correlation Between Franklin Liberty and Blackrock ETF

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

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

Diversification Opportunities for Franklin Liberty and Blackrock ETF

0.87

Correlation Coefficient

Franklin Liberty  Blackrock ETF

Very poor diversification

The 3 months correlation between Franklin and Blackrock is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Senior and Blackrock ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock ETF Trust and Franklin Liberty 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 Liberty Senior are associated (or correlated) with Blackrock ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock ETF Trust has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Blackrock ETF go up and down completely randomly.

Pair Corralation between Franklin Liberty and Blackrock ETF

Given the investment horizon of 90 days Franklin Liberty Senior is expected to generate 0.84 times more return on investment than Blackrock ETF. However, Franklin Liberty Senior is 1.19 times less risky than Blackrock ETF. It trades about 0.03 of its potential returns per unit of risk. Blackrock ETF Trust is currently generating about 0.01 per unit of risk. If you would invest  2,400  in Franklin Liberty Senior on December 30, 2024 and sell it today you would earn a total of  6.00  from holding Franklin Liberty Senior or generate 0.25% return on investment over 90 days.

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

Franklin Liberty Senior  vs.  Blackrock ETF Trust

Franklin Liberty Senior

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Senior are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Franklin Liberty is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Blackrock ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Blackrock ETF is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Franklin Liberty and Blackrock ETF

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

The idea behind Franklin Liberty Senior and Blackrock ETF Trust 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.