Correlation Between Franklin Lifesmart and Geneva Smid

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

By analyzing existing cross correlation between Franklin Lifesmart 2055 and Geneva Smid Cap, you can compare the effects of market volatilities on Franklin Lifesmart and Geneva Smid 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 Geneva Smid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Geneva Smid.

Diversification Opportunities for Franklin Lifesmart and Geneva Smid

0.62

Correlation Coefficient

Franklin Lifesmart  Geneva Smid

Poor diversification

The 3 months correlation between Franklin and Geneva is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart 2055 and Geneva Smid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geneva Smid Cap 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 2055 are associated (or correlated) with Geneva Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geneva Smid Cap has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Geneva Smid go up and down completely randomly.

Pair Corralation between Franklin Lifesmart and Geneva Smid

Assuming the 90 days horizon Franklin Lifesmart 2055 is expected to generate 0.76 times more return on investment than Geneva Smid. However, Franklin Lifesmart 2055 is 1.32 times less risky than Geneva Smid. It trades about -0.01 of its potential returns per unit of risk. Geneva Smid Cap is currently generating about -0.06 per unit of risk. If you would invest  1,416  in Franklin Lifesmart 2055 on December 29, 2024 and sell it today you would lose (11.00) from holding Franklin Lifesmart 2055 or give up 0.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Franklin Lifesmart 2055  vs.  Geneva Smid Cap

Franklin Lifesmart 2055

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Lifesmart 2055 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.

Geneva Smid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Geneva Smid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Geneva Smid 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 Geneva Smid

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

The idea behind Franklin Lifesmart 2055 and Geneva Smid Cap 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.