Correlation Between Franklin Liberty and Global X

Can any of the company-specific risk be diversified away by investing in both Franklin Liberty and Global X 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 Global X 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 Global X Short Term, you can compare the effects of market volatilities on Franklin Liberty and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and Global X.

Diversification Opportunities for Franklin Liberty and Global X

0.98

Correlation Coefficient

Franklin Liberty  Global X

Almost no diversification

The 3 months correlation between Franklin and Global is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Short and Global X Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Short 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Short has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Global X go up and down completely randomly.

Pair Corralation between Franklin Liberty and Global X

Given the investment horizon of 90 days Franklin Liberty Short is expected to generate 1.78 times more return on investment than Global X. However, Franklin Liberty is 1.78 times more volatile than Global X Short Term. It trades about 0.23 of its potential returns per unit of risk. Global X Short Term is currently generating about 0.35 per unit of risk. If you would invest  8,946  in Franklin Liberty Short on December 23, 2024 and sell it today you would earn a total of  133.00  from holding Franklin Liberty Short or generate 1.49% return on investment over 90 days.

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

Franklin Liberty Short  vs.  Global X Short Term

Franklin Liberty Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Short are ranked lower than 17 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Global X Short

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Short Term are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Global X is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Franklin Liberty and Global X

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

The idea behind Franklin Liberty Short and Global X Short Term 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.