Correlation Between Franklin FTSE and IShares Latin

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

Diversification Opportunities for Franklin FTSE and IShares Latin

0.93

Correlation Coefficient

Franklin FTSE  IShares Latin

Almost no diversification

The 3 months correlation between Franklin and IShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Franklin FTSE South and iShares Latin America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Latin America 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 IShares Latin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Latin America has no effect on the direction of Franklin FTSE i.e., Franklin FTSE and IShares Latin go up and down completely randomly.

Pair Corralation between Franklin FTSE and IShares Latin

Given the investment horizon of 90 days Franklin FTSE South is expected to under-perform the IShares Latin. But the etf apears to be less risky and, when comparing its historical volatility, Franklin FTSE South is 1.19 times less risky than IShares Latin. The etf trades about -0.28 of its potential returns per unit of risk. The iShares Latin America is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  2,293  in iShares Latin America on September 22, 2024 and sell it today you would lose (165.00) from holding iShares Latin America or give up 7.2% of portfolio value over 90 days.

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

Franklin FTSE South  vs.  iShares Latin America

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 January 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

iShares Latin America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Latin America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with Franklin FTSE and IShares Latin

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

The idea behind Franklin FTSE South and iShares Latin America 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 Transaction History module to view history of all your transactions and understand their impact on performance.