Correlation Between Franklin Liberty and Vanguard Intermediate

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

Diversification Opportunities for Franklin Liberty and Vanguard Intermediate

1.0

Correlation Coefficient

Franklin Liberty  Vanguard Intermediate

No risk reduction

The 3 months correlation between Franklin and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Investment and Vanguard Intermediate Term Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate 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 Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Vanguard Intermediate go up and down completely randomly.

Pair Corralation between Franklin Liberty and Vanguard Intermediate

Given the investment horizon of 90 days Franklin Liberty is expected to generate 1.16 times less return on investment than Vanguard Intermediate. In addition to that, Franklin Liberty is 1.11 times more volatile than Vanguard Intermediate Term Corporate. It trades about 0.1 of its total potential returns per unit of risk. Vanguard Intermediate Term Corporate is currently generating about 0.12 per unit of volatility. If you would invest  7,984  in Vanguard Intermediate Term Corporate on December 30, 2024 and sell it today you would earn a total of  183.00  from holding Vanguard Intermediate Term Corporate or generate 2.29% return on investment over 90 days.

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

Franklin Liberty Investment  vs.  Vanguard Intermediate Term Cor

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 7 (%) 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.

Vanguard Intermediate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Intermediate Term Corporate are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Vanguard Intermediate 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 Vanguard Intermediate

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

The idea behind Franklin Liberty Investment and Vanguard Intermediate Term Corporate 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..