Correlation Between Franklin Large and IShares Canadian

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

By analyzing existing cross correlation between Franklin Large Cap and iShares Canadian HYBrid, you can compare the effects of market volatilities on Franklin Large and IShares Canadian 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 Large with a short position of IShares Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Large and IShares Canadian.

Diversification Opportunities for Franklin Large and IShares Canadian

0.82

Correlation Coefficient

Franklin Large  IShares Canadian

Very poor diversification

The 3 months correlation between Franklin and IShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Large Cap and iShares Canadian HYBrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian HYBrid and Franklin Large 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 Large Cap are associated (or correlated) with IShares Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian HYBrid has no effect on the direction of Franklin Large i.e., Franklin Large and IShares Canadian go up and down completely randomly.

Pair Corralation between Franklin Large and IShares Canadian

Assuming the 90 days trading horizon Franklin Large Cap is expected to generate 1.76 times more return on investment than IShares Canadian. However, Franklin Large is 1.76 times more volatile than iShares Canadian HYBrid. It trades about 0.23 of its potential returns per unit of risk. iShares Canadian HYBrid is currently generating about 0.18 per unit of risk. If you would invest  4,847  in Franklin Large Cap on September 13, 2024 and sell it today you would earn a total of  146.00  from holding Franklin Large Cap or generate 3.01% return on investment over 90 days.

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

Franklin Large Cap  vs.  iShares Canadian HYBrid

Franklin Large Cap

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Large Cap are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Franklin Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Canadian HYBrid

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Franklin Large and IShares Canadian

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

The idea behind Franklin Large Cap and iShares Canadian HYBrid 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.