Correlation Between Franklin Liberty and Overlay Shares

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

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

Diversification Opportunities for Franklin Liberty and Overlay Shares

-0.11

Correlation Coefficient

Franklin Liberty  Overlay Shares

Good diversification

The 3 months correlation between Franklin and Overlay is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Systematic and Overlay Shares Foreign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares Foreign 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 Systematic are associated (or correlated) with Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Foreign has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Overlay Shares go up and down completely randomly.

Pair Corralation between Franklin Liberty and Overlay Shares

Given the investment horizon of 90 days Franklin Liberty Systematic is expected to generate 0.64 times more return on investment than Overlay Shares. However, Franklin Liberty Systematic is 1.55 times less risky than Overlay Shares. It trades about 0.03 of its potential returns per unit of risk. Overlay Shares Foreign is currently generating about -0.01 per unit of risk. If you would invest  2,366  in Franklin Liberty Systematic on October 27, 2024 and sell it today you would earn a total of  21.00  from holding Franklin Liberty Systematic or generate 0.89% return on investment over 90 days.

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

Franklin Liberty Systematic  vs.  Overlay Shares Foreign

Franklin Liberty Sys

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Systematic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Franklin Liberty is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Overlay Shares Foreign

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Overlay Shares Foreign has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Overlay Shares is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Franklin Liberty and Overlay Shares

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

The idea behind Franklin Liberty Systematic and Overlay Shares Foreign 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.