Correlation Between Franklin Liberty and Stone Ridge

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

By analyzing existing cross correlation between Franklin Liberty Treasury and Stone Ridge 2051, you can compare the effects of market volatilities on Franklin Liberty and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and Stone Ridge.

Diversification Opportunities for Franklin Liberty and Stone Ridge

0.99

Correlation Coefficient

Franklin Liberty  Stone Ridge

No risk reduction

The 3 months correlation between Franklin and Stone is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Treasury and Stone Ridge 2051 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge 2051 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 Treasury are associated (or correlated) with Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge 2051 has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Stone Ridge go up and down completely randomly.

Pair Corralation between Franklin Liberty and Stone Ridge

Given the investment horizon of 90 days Franklin Liberty is expected to generate 1.2 times less return on investment than Stone Ridge. But when comparing it to its historical volatility, Franklin Liberty Treasury is 1.77 times less risky than Stone Ridge. It trades about 0.15 of its potential returns per unit of risk. Stone Ridge 2051 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  13,041  in Stone Ridge 2051 on December 29, 2024 and sell it today you would earn a total of  410.00  from holding Stone Ridge 2051 or generate 3.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Franklin Liberty Treasury  vs.  Stone Ridge 2051

Franklin Liberty Treasury

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Treasury are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Stone Ridge 2051

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge 2051 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Stone Ridge is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Franklin Liberty and Stone Ridge

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

The idea behind Franklin Liberty Treasury and Stone Ridge 2051 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.