Correlation Between Franklin Lifesmart and Pimco Energy

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

By analyzing existing cross correlation between Franklin Lifesmart 2045 and Pimco Energy Tactical, you can compare the effects of market volatilities on Franklin Lifesmart and Pimco Energy 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 Lifesmart with a short position of Pimco Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and Pimco Energy.

Diversification Opportunities for Franklin Lifesmart and Pimco Energy

-0.03

Correlation Coefficient

Franklin Lifesmart  Pimco Energy

Good diversification

The 3 months correlation between Franklin and Pimco is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart 2045 and Pimco Energy Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Energy Tactical and Franklin Lifesmart 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 Lifesmart 2045 are associated (or correlated) with Pimco Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Energy Tactical has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and Pimco Energy go up and down completely randomly.

Pair Corralation between Franklin Lifesmart and Pimco Energy

Assuming the 90 days horizon Franklin Lifesmart 2045 is expected to generate 0.22 times more return on investment than Pimco Energy. However, Franklin Lifesmart 2045 is 4.51 times less risky than Pimco Energy. It trades about -0.02 of its potential returns per unit of risk. Pimco Energy Tactical is currently generating about -0.02 per unit of risk. If you would invest  1,579  in Franklin Lifesmart 2045 on December 21, 2024 and sell it today you would lose (15.00) from holding Franklin Lifesmart 2045 or give up 0.95% of portfolio value over 90 days.

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

Franklin Lifesmart 2045  vs.  Pimco Energy Tactical

Franklin Lifesmart 2045

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Lifesmart 2045 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin Lifesmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pimco Energy Tactical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco Energy Tactical has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Pimco Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Lifesmart and Pimco Energy

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

The idea behind Franklin Lifesmart 2045 and Pimco Energy Tactical 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.