Correlation Between Franklin FTSE and WisdomTree China

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

By analyzing existing cross correlation between Franklin FTSE South and WisdomTree China ex State Owned, you can compare the effects of market volatilities on Franklin FTSE and WisdomTree China 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 FTSE with a short position of WisdomTree China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin FTSE and WisdomTree China.

Diversification Opportunities for Franklin FTSE and WisdomTree China

0.71

Correlation Coefficient

Franklin FTSE  WisdomTree China

Poor diversification

The 3 months correlation between Franklin and WisdomTree is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Franklin FTSE South and WisdomTree China ex State Owne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree China and Franklin FTSE 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 FTSE South are associated (or correlated) with WisdomTree China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree China has no effect on the direction of Franklin FTSE i.e., Franklin FTSE and WisdomTree China go up and down completely randomly.

Pair Corralation between Franklin FTSE and WisdomTree China

Given the investment horizon of 90 days Franklin FTSE South is expected to generate 0.72 times more return on investment than WisdomTree China. However, Franklin FTSE South is 1.39 times less risky than WisdomTree China. It trades about 0.0 of its potential returns per unit of risk. WisdomTree China ex State Owned is currently generating about -0.02 per unit of risk. If you would invest  1,978  in Franklin FTSE South on October 10, 2024 and sell it today you would lose (144.00) from holding Franklin FTSE South or give up 7.28% of portfolio value over 90 days.

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

Franklin FTSE South  vs.  WisdomTree China ex State Owne

Franklin FTSE South

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin FTSE South has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Etf's forward-looking signals remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

WisdomTree China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree China ex State Owned has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with Franklin FTSE and WisdomTree China

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

The idea behind Franklin FTSE South and WisdomTree China ex State Owned 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.