Correlation Between Franklin Lifesmart and Wcm Focused

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

Diversification Opportunities for Franklin Lifesmart and Wcm Focused

0.59

Correlation Coefficient

Franklin Lifesmart  Wcm Focused

Very weak diversification

The 3 months correlation between Franklin and Wcm is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart Retirement and Wcm Focused Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wcm Focused Small 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 Wcm Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wcm Focused Small has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Wcm Focused go up and down completely randomly.

Pair Corralation between Franklin Lifesmart and Wcm Focused

Assuming the 90 days horizon Franklin Lifesmart Retirement is expected to generate 0.49 times more return on investment than Wcm Focused. However, Franklin Lifesmart Retirement is 2.03 times less risky than Wcm Focused. It trades about -0.34 of its potential returns per unit of risk. Wcm Focused Small is currently generating about -0.33 per unit of risk. If you would invest  1,085  in Franklin Lifesmart Retirement on October 10, 2024 and sell it today you would lose (34.00) from holding Franklin Lifesmart Retirement or give up 3.13% of portfolio value over 90 days.

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

Franklin Lifesmart Retirement  vs.  Wcm Focused Small

Franklin Lifesmart

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Lifesmart Retirement has generated negative risk-adjusted returns adding no value to fund investors. 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.

Wcm Focused Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wcm Focused Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward-looking indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Franklin Lifesmart and Wcm Focused

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

The idea behind Franklin Lifesmart Retirement and Wcm Focused Small 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.