Correlation Between Franklin Lifesmart and Tax Managed
Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart and Tax Managed 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 Tax Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Lifesmart 2045 and Tax Managed Mid Small, you can compare the effects of market volatilities on Franklin Lifesmart and Tax Managed 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 Tax Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Tax Managed.
Diversification Opportunities for Franklin Lifesmart and Tax Managed
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Tax is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart 2045 and Tax Managed Mid Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Managed Mid 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 2045 are associated (or correlated) with Tax Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Managed Mid has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Tax Managed go up and down completely randomly.
Pair Corralation between Franklin Lifesmart and Tax Managed
Assuming the 90 days horizon Franklin Lifesmart 2045 is expected to under-perform the Tax Managed. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin Lifesmart 2045 is 1.76 times less risky than Tax Managed. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Tax Managed Mid Small is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 4,197 in Tax Managed Mid Small on October 6, 2024 and sell it today you would lose (49.00) from holding Tax Managed Mid Small or give up 1.17% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Franklin Lifesmart 2045 vs. Tax Managed Mid Small
Performance |
Timeline |
Franklin Lifesmart 2045 |
Tax Managed Mid |
Franklin Lifesmart and Tax Managed Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Franklin Lifesmart and Tax Managed
The main advantage of trading using opposite Franklin Lifesmart and Tax Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart position performs unexpectedly, Tax Managed 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 Tax Managed will offset losses from the drop in Tax Managed's long position.Franklin Lifesmart vs. Valic Company I | Franklin Lifesmart vs. Lord Abbett Small | Franklin Lifesmart vs. Ultrasmall Cap Profund Ultrasmall Cap | Franklin Lifesmart vs. Lsv Small Cap |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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