Correlation Between Franklin Liberty and VanEck Long

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

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

Diversification Opportunities for Franklin Liberty and VanEck Long

0.83

Correlation Coefficient

Franklin Liberty  VanEck Long

Very poor diversification

The 3 months correlation between Franklin and VanEck is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Intermediate and VanEck Long Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Long Muni 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 Intermediate are associated (or correlated) with VanEck Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Long Muni has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and VanEck Long go up and down completely randomly.

Pair Corralation between Franklin Liberty and VanEck Long

Given the investment horizon of 90 days Franklin Liberty is expected to generate 5.08 times less return on investment than VanEck Long. But when comparing it to its historical volatility, Franklin Liberty Intermediate is 1.34 times less risky than VanEck Long. It trades about 0.03 of its potential returns per unit of risk. VanEck Long Muni is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,755  in VanEck Long Muni on October 20, 2024 and sell it today you would earn a total of  15.00  from holding VanEck Long Muni or generate 0.85% return on investment over 90 days.

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

Franklin Liberty Intermediate  vs.  VanEck Long Muni

Franklin Liberty Int

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Liberty Intermediate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

VanEck Long Muni

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Long Muni has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, VanEck Long is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Franklin Liberty and VanEck Long

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

The idea behind Franklin Liberty Intermediate and VanEck Long Muni 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.