Correlation Between Franklin Lifesmart and Columbia Corporate

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

By analyzing existing cross correlation between Franklin Lifesmart Retirement and Columbia Corporate Income, you can compare the effects of market volatilities on Franklin Lifesmart and Columbia Corporate 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 Lifesmart with a short position of Columbia Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Columbia Corporate.

Diversification Opportunities for Franklin Lifesmart and Columbia Corporate

0.67

Correlation Coefficient

Franklin Lifesmart  Columbia Corporate

Poor diversification

The 3 months correlation between Franklin and Columbia is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart Retirement and Columbia Corporate Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Corporate Income and Franklin Lifesmart 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 Lifesmart Retirement are associated (or correlated) with Columbia Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Corporate Income has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Columbia Corporate go up and down completely randomly.

Pair Corralation between Franklin Lifesmart and Columbia Corporate

Assuming the 90 days horizon Franklin Lifesmart is expected to generate 1.98 times less return on investment than Columbia Corporate. In addition to that, Franklin Lifesmart is 1.32 times more volatile than Columbia Corporate Income. It trades about 0.05 of its total potential returns per unit of risk. Columbia Corporate Income is currently generating about 0.14 per unit of volatility. If you would invest  893.00  in Columbia Corporate Income on December 23, 2024 and sell it today you would earn a total of  21.00  from holding Columbia Corporate Income or generate 2.35% return on investment over 90 days.

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

Franklin Lifesmart Retirement  vs.  Columbia Corporate Income

Franklin Lifesmart

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Lifesmart Retirement are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Lifesmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Corporate Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Corporate Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Columbia Corporate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Lifesmart and Columbia Corporate

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

The idea behind Franklin Lifesmart Retirement and Columbia Corporate Income 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.