Correlation Between Hennessy and Franklin Lifesmart

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

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

Diversification Opportunities for Hennessy and Franklin Lifesmart

0.2

Correlation Coefficient

Hennessy  Franklin Lifesmart

Modest diversification

The 3 months correlation between Hennessy and Franklin is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and Franklin Lifesmart 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2045 and Hennessy 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 Hennessy Bp Energy are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2045 has no effect on the direction of Hennessy i.e., Hennessy and Franklin Lifesmart go up and down completely randomly.

Pair Corralation between Hennessy and Franklin Lifesmart

Assuming the 90 days horizon Hennessy is expected to generate 1.03 times less return on investment than Franklin Lifesmart. In addition to that, Hennessy is 1.96 times more volatile than Franklin Lifesmart 2045. It trades about 0.04 of its total potential returns per unit of risk. Franklin Lifesmart 2045 is currently generating about 0.08 per unit of volatility. If you would invest  1,224  in Franklin Lifesmart 2045 on October 22, 2024 and sell it today you would earn a total of  352.00  from holding Franklin Lifesmart 2045 or generate 28.76% return on investment over 90 days.

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

Hennessy Bp Energy  vs.  Franklin Lifesmart 2045

Hennessy Bp Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Bp Energy are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Hennessy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Franklin Lifesmart 2045

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Hennessy and Franklin Lifesmart

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

The idea behind Hennessy Bp Energy and Franklin Lifesmart 2045 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.