Correlation Between Franklin Liberty and Franklin LibertyQ

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

By analyzing existing cross correlation between Franklin Liberty Investment and Franklin LibertyQ Small, you can compare the effects of market volatilities on Franklin Liberty and Franklin LibertyQ 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 Franklin LibertyQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and Franklin LibertyQ.

Diversification Opportunities for Franklin Liberty and Franklin LibertyQ

-0.38

Correlation Coefficient

Franklin Liberty  Franklin LibertyQ

Very good diversification

The 3 months correlation between Franklin and Franklin is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Investment and Franklin LibertyQ Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin LibertyQ Small 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 Investment are associated (or correlated) with Franklin LibertyQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin LibertyQ Small has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Franklin LibertyQ go up and down completely randomly.

Pair Corralation between Franklin Liberty and Franklin LibertyQ

Given the investment horizon of 90 days Franklin Liberty Investment is expected to generate 0.33 times more return on investment than Franklin LibertyQ. However, Franklin Liberty Investment is 3.05 times less risky than Franklin LibertyQ. It trades about 0.13 of its potential returns per unit of risk. Franklin LibertyQ Small is currently generating about -0.08 per unit of risk. If you would invest  2,090  in Franklin Liberty Investment on December 21, 2024 and sell it today you would earn a total of  53.50  from holding Franklin Liberty Investment or generate 2.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Franklin Liberty Investment  vs.  Franklin LibertyQ Small

Franklin Liberty Inv

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Franklin Liberty is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Franklin LibertyQ Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin LibertyQ Small has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Franklin LibertyQ is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Franklin Liberty and Franklin LibertyQ

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

The idea behind Franklin Liberty Investment and Franklin LibertyQ Small 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.