Correlation Between Franklin LibertyShares and Franklin LibertyQ

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

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

Diversification Opportunities for Franklin LibertyShares and Franklin LibertyQ

0.24

Correlation Coefficient

Franklin LibertyShares  Franklin LibertyQ

Modest diversification

The 3 months correlation between Franklin and Franklin is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Franklin LibertyShares ICAV and Franklin LibertyQ Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin LibertyQ Global and Franklin LibertyShares 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 LibertyShares ICAV are associated (or correlated) with Franklin LibertyQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin LibertyQ Global has no effect on the direction of Franklin LibertyShares i.e., Franklin LibertyShares and Franklin LibertyQ go up and down completely randomly.

Pair Corralation between Franklin LibertyShares and Franklin LibertyQ

Assuming the 90 days trading horizon Franklin LibertyShares is expected to generate 27.3 times less return on investment than Franklin LibertyQ. But when comparing it to its historical volatility, Franklin LibertyShares ICAV is 27.55 times less risky than Franklin LibertyQ. It trades about 0.13 of its potential returns per unit of risk. Franklin LibertyQ Global is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,358  in Franklin LibertyQ Global on September 4, 2024 and sell it today you would earn a total of  1,572  from holding Franklin LibertyQ Global or generate 115.76% return on investment over 90 days.

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

Franklin LibertyShares ICAV  vs.  Franklin LibertyQ Global

Franklin LibertyShares

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin LibertyShares ICAV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Franklin LibertyShares is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Franklin LibertyQ Global

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin LibertyQ Global are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Franklin LibertyQ unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin LibertyShares and Franklin LibertyQ

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

The idea behind Franklin LibertyShares ICAV and Franklin LibertyQ Global 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.