Correlation Between Hood River and Franklin Lifesmart

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

By analyzing existing cross correlation between Hood River New and Franklin Lifesmart 2050, you can compare the effects of market volatilities on Hood River 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 Hood River with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hood River and Franklin Lifesmart.

Diversification Opportunities for Hood River and Franklin Lifesmart

0.81

Correlation Coefficient

Hood River  Franklin Lifesmart

Very poor diversification

The 3 months correlation between Hood and FRANKLIN is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hood River New and Franklin Lifesmart 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2050 and Hood River 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 Hood River New 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 2050 has no effect on the direction of Hood River i.e., Hood River and Franklin Lifesmart go up and down completely randomly.

Pair Corralation between Hood River and Franklin Lifesmart

Assuming the 90 days horizon Hood River New is expected to generate 1.88 times more return on investment than Franklin Lifesmart. However, Hood River is 1.88 times more volatile than Franklin Lifesmart 2050. It trades about 0.35 of its potential returns per unit of risk. Franklin Lifesmart 2050 is currently generating about 0.13 per unit of risk. If you would invest  1,092  in Hood River New on September 3, 2024 and sell it today you would earn a total of  328.00  from holding Hood River New or generate 30.04% return on investment over 90 days.

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

Hood River New  vs.  Franklin Lifesmart 2050

Hood River New

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Hood River New are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Hood River showed solid returns over the last few months and may actually be approaching a breakup point.

Franklin Lifesmart 2050

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Lifesmart 2050 are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. 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 Hood River and Franklin Lifesmart

The main advantage of trading using opposite Hood River and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hood River 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 Hood River New and Franklin Lifesmart 2050 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.