Correlation Between FlexShares Global and Franklin Liberty

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

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

Diversification Opportunities for FlexShares Global and Franklin Liberty

0.3

Correlation Coefficient

FlexShares Global  Franklin Liberty

Weak diversification

The 3 months correlation between FlexShares and Franklin is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Global Quality and Franklin Liberty High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty High and FlexShares Global 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 FlexShares Global Quality are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty High has no effect on the direction of FlexShares Global i.e., FlexShares Global and Franklin Liberty go up and down completely randomly.

Pair Corralation between FlexShares Global and Franklin Liberty

Given the investment horizon of 90 days FlexShares Global Quality is expected to generate 3.57 times more return on investment than Franklin Liberty. However, FlexShares Global is 3.57 times more volatile than Franklin Liberty High. It trades about 0.12 of its potential returns per unit of risk. Franklin Liberty High is currently generating about 0.17 per unit of risk. If you would invest  5,375  in FlexShares Global Quality on September 15, 2024 and sell it today you would earn a total of  631.00  from holding FlexShares Global Quality or generate 11.74% return on investment over 90 days.

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

FlexShares Global Quality  vs.  Franklin Liberty High

FlexShares Global Quality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares Global Quality has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FlexShares Global is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Franklin Liberty High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Liberty High has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Franklin Liberty is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FlexShares Global and Franklin Liberty

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

The idea behind FlexShares Global Quality and Franklin Liberty High 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.