Correlation Between Franklin Liberty and US Treasury

Can any of the company-specific risk be diversified away by investing in both Franklin Liberty and US Treasury 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 US Treasury 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 US Treasury 6, you can compare the effects of market volatilities on Franklin Liberty and US Treasury 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 US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and US Treasury.

Diversification Opportunities for Franklin Liberty and US Treasury

0.92

Correlation Coefficient

Franklin Liberty  US Treasury

Almost no diversification

The 3 months correlation between Franklin and XBIL is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Treasury and US Treasury 6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 6 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 US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 6 has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and US Treasury go up and down completely randomly.

Pair Corralation between Franklin Liberty and US Treasury

Given the investment horizon of 90 days Franklin Liberty Treasury is expected to generate 12.58 times more return on investment than US Treasury. However, Franklin Liberty is 12.58 times more volatile than US Treasury 6. It trades about 0.15 of its potential returns per unit of risk. US Treasury 6 is currently generating about 0.73 per unit of risk. If you would invest  1,999  in Franklin Liberty Treasury on December 29, 2024 and sell it today you would earn a total of  52.00  from holding Franklin Liberty Treasury or generate 2.6% 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 Treasury  vs.  US Treasury 6

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.

US Treasury 6

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in US Treasury 6 are ranked lower than 57 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, US Treasury is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Franklin Liberty and US Treasury

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

The idea behind Franklin Liberty Treasury and US Treasury 6 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.