Correlation Between Franklin Templeton and First Trust

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

By analyzing existing cross correlation between Franklin Templeton Limited and First Trust Intermediate, you can compare the effects of market volatilities on Franklin Templeton and First Trust 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 Templeton with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Templeton and First Trust.

Diversification Opportunities for Franklin Templeton and First Trust

0.83

Correlation Coefficient

Franklin Templeton  First Trust

Very poor diversification

The 3 months correlation between Franklin and First is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Templeton Limited and First Trust Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Intermediate and Franklin Templeton 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 Templeton Limited are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Intermediate has no effect on the direction of Franklin Templeton i.e., Franklin Templeton and First Trust go up and down completely randomly.

Pair Corralation between Franklin Templeton and First Trust

Considering the 90-day investment horizon Franklin Templeton is expected to generate 2.63 times less return on investment than First Trust. In addition to that, Franklin Templeton is 1.0 times more volatile than First Trust Intermediate. It trades about 0.06 of its total potential returns per unit of risk. First Trust Intermediate is currently generating about 0.17 per unit of volatility. If you would invest  1,747  in First Trust Intermediate on December 28, 2024 and sell it today you would earn a total of  99.00  from holding First Trust Intermediate or generate 5.67% return on investment over 90 days.

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

Franklin Templeton Limited  vs.  First Trust Intermediate

Franklin Templeton

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Templeton Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Franklin Templeton is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

First Trust Intermediate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Intermediate are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, First Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Franklin Templeton and First Trust

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

The idea behind Franklin Templeton Limited and First Trust Intermediate 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.