Correlation Between Franklin FTSE and IShares Global

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

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

Diversification Opportunities for Franklin FTSE and IShares Global

0.52

Correlation Coefficient

Franklin FTSE  IShares Global

Very weak diversification

The 3 months correlation between Franklin and IShares is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Franklin FTSE Brazil and iShares Global Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Corp and Franklin FTSE 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 FTSE Brazil are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Corp has no effect on the direction of Franklin FTSE i.e., Franklin FTSE and IShares Global go up and down completely randomly.

Pair Corralation between Franklin FTSE and IShares Global

Assuming the 90 days trading horizon Franklin FTSE Brazil is expected to generate 3.65 times more return on investment than IShares Global. However, Franklin FTSE is 3.65 times more volatile than iShares Global Corp. It trades about 0.18 of its potential returns per unit of risk. iShares Global Corp is currently generating about 0.11 per unit of risk. If you would invest  1,635  in Franklin FTSE Brazil on December 26, 2024 and sell it today you would earn a total of  237.00  from holding Franklin FTSE Brazil or generate 14.5% return on investment over 90 days.

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

Franklin FTSE Brazil  vs.  iShares Global Corp

Franklin FTSE Brazil

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin FTSE Brazil are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Franklin FTSE unveiled solid returns over the last few months and may actually be approaching a breakup point.

iShares Global Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Global is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Franklin FTSE and IShares Global

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

The idea behind Franklin FTSE Brazil and iShares Global Corp 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.