Correlation Between Franklin Liberty and T Rowe

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

Diversification Opportunities for Franklin Liberty and T Rowe

0.9

Correlation Coefficient

Franklin Liberty  T Rowe

Almost no diversification

The 3 months correlation between Franklin and RRTLX is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Investment and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price 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 T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and T Rowe go up and down completely randomly.

Pair Corralation between Franklin Liberty and T Rowe

Given the investment horizon of 90 days Franklin Liberty is expected to generate 9.29 times less return on investment than T Rowe. But when comparing it to its historical volatility, Franklin Liberty Investment is 1.12 times less risky than T Rowe. It trades about 0.02 of its potential returns per unit of risk. T Rowe Price is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,204  in T Rowe Price on October 22, 2024 and sell it today you would earn a total of  11.00  from holding T Rowe Price or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	94.74%
Values	Daily Returns

Franklin Liberty Investment  vs.  T Rowe Price

Franklin Liberty Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Liberty Investment has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

T Rowe Price

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T Rowe Price has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, T Rowe 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 Liberty and T Rowe

The main advantage of trading using opposite Franklin Liberty and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Liberty position performs unexpectedly, T Rowe 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 T Rowe will offset losses from the drop in T Rowe's long position.

The idea behind Franklin Liberty Investment and T Rowe Price 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.