Correlation Between Franklin Liberty and Pacer Pacific

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

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

Diversification Opportunities for Franklin Liberty and Pacer Pacific

0.53

Correlation Coefficient

Franklin Liberty  Pacer Pacific

Very weak diversification

The 3 months correlation between Franklin and Pacer is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Short and Pacer Pacific Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Pacific Asset 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 Short are associated (or correlated) with Pacer Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Pacific Asset has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Pacer Pacific go up and down completely randomly.

Pair Corralation between Franklin Liberty and Pacer Pacific

Given the investment horizon of 90 days Franklin Liberty is expected to generate 2.94 times less return on investment than Pacer Pacific. In addition to that, Franklin Liberty is 1.29 times more volatile than Pacer Pacific Asset. It trades about 0.15 of its total potential returns per unit of risk. Pacer Pacific Asset is currently generating about 0.56 per unit of volatility. If you would invest  4,681  in Pacer Pacific Asset on September 13, 2024 and sell it today you would earn a total of  97.00  from holding Pacer Pacific Asset or generate 2.07% return on investment over 90 days.

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

Franklin Liberty Short  vs.  Pacer Pacific Asset

Franklin Liberty Short

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Short are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Franklin Liberty is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pacer Pacific Asset

Risk-Adjusted Performance

44 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Pacific Asset are ranked lower than 44 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Pacer Pacific is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Franklin Liberty and Pacer Pacific

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

The idea behind Franklin Liberty Short and Pacer Pacific Asset 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..