Correlation Between Franklin LibertyQ and RiverFront Dynamic

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

By analyzing existing cross correlation between Franklin LibertyQ Small and RiverFront Dynamic Dividend, you can compare the effects of market volatilities on Franklin LibertyQ and RiverFront Dynamic 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 LibertyQ with a short position of RiverFront Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin LibertyQ and RiverFront Dynamic.

Diversification Opportunities for Franklin LibertyQ and RiverFront Dynamic

0.72

Correlation Coefficient

Franklin LibertyQ  RiverFront Dynamic

Poor diversification

The 3 months correlation between Franklin and RiverFront is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Franklin LibertyQ Small and RiverFront Dynamic Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RiverFront Dynamic and Franklin LibertyQ 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 LibertyQ Small are associated (or correlated) with RiverFront Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RiverFront Dynamic has no effect on the direction of Franklin LibertyQ i.e., Franklin LibertyQ and RiverFront Dynamic go up and down completely randomly.

Pair Corralation between Franklin LibertyQ and RiverFront Dynamic

Given the investment horizon of 90 days Franklin LibertyQ is expected to generate 1.27 times less return on investment than RiverFront Dynamic. In addition to that, Franklin LibertyQ is 1.3 times more volatile than RiverFront Dynamic Dividend. It trades about 0.05 of its total potential returns per unit of risk. RiverFront Dynamic Dividend is currently generating about 0.08 per unit of volatility. If you would invest  4,056  in RiverFront Dynamic Dividend on October 10, 2024 and sell it today you would earn a total of  1,534  from holding RiverFront Dynamic Dividend or generate 37.83% return on investment over 90 days.

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

Franklin LibertyQ Small  vs.  RiverFront Dynamic Dividend

Franklin LibertyQ Small

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Franklin LibertyQ Small has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Franklin LibertyQ is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

RiverFront Dynamic

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RiverFront Dynamic Dividend are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, RiverFront Dynamic is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin LibertyQ and RiverFront Dynamic

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

The idea behind Franklin LibertyQ Small and RiverFront Dynamic Dividend 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.