Correlation Between Franklin Liberty and Virtus Newfleet

Can any of the company-specific risk be diversified away by investing in both Franklin Liberty and Virtus Newfleet 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 Virtus Newfleet 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 Virtus Newfleet Multi Sector, you can compare the effects of market volatilities on Franklin Liberty and Virtus Newfleet 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 Virtus Newfleet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and Virtus Newfleet.

Diversification Opportunities for Franklin Liberty and Virtus Newfleet

-0.2

Correlation Coefficient

Franklin Liberty  Virtus Newfleet

Good diversification

The 3 months correlation between Franklin and Virtus is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Senior and Virtus Newfleet Multi Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Newfleet Multi 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 Virtus Newfleet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Newfleet Multi has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Virtus Newfleet go up and down completely randomly.

Pair Corralation between Franklin Liberty and Virtus Newfleet

Given the investment horizon of 90 days Franklin Liberty Senior is expected to generate 0.3 times more return on investment than Virtus Newfleet. However, Franklin Liberty Senior is 3.37 times less risky than Virtus Newfleet. It trades about 0.46 of its potential returns per unit of risk. Virtus Newfleet Multi Sector is currently generating about 0.12 per unit of risk. If you would invest  2,419  in Franklin Liberty Senior on September 12, 2024 and sell it today you would earn a total of  18.00  from holding Franklin Liberty Senior or generate 0.74% return on investment over 90 days.

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

Franklin Liberty Senior  vs.  Virtus Newfleet Multi Sector

Franklin Liberty Senior

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Senior are ranked lower than 27 (%) 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 newest stock price mess, may contribute to short-term losses for the institutional investors.

Virtus Newfleet Multi

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Virtus Newfleet Multi Sector has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Virtus Newfleet 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 Franklin Liberty and Virtus Newfleet

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

The idea behind Franklin Liberty Senior and Virtus Newfleet Multi Sector 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.