Correlation Between IShares India and Franklin FTSE

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

By analyzing existing cross correlation between iShares India 50 and Franklin FTSE India, you can compare the effects of market volatilities on IShares India and Franklin FTSE 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 IShares India with a short position of Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares India and Franklin FTSE.

Diversification Opportunities for IShares India and Franklin FTSE

0.97

Correlation Coefficient

IShares India  Franklin FTSE

Almost no diversification

The 3 months correlation between IShares and Franklin is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares India 50 and Franklin FTSE India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE India and IShares India 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 iShares India 50 are associated (or correlated) with Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE India has no effect on the direction of IShares India i.e., IShares India and Franklin FTSE go up and down completely randomly.

Pair Corralation between IShares India and Franklin FTSE

Given the investment horizon of 90 days iShares India 50 is expected to generate 0.82 times more return on investment than Franklin FTSE. However, iShares India 50 is 1.21 times less risky than Franklin FTSE. It trades about 0.0 of its potential returns per unit of risk. Franklin FTSE India is currently generating about -0.04 per unit of risk. If you would invest  5,086  in iShares India 50 on December 29, 2024 and sell it today you would lose (21.00) from holding iShares India 50 or give up 0.41% of portfolio value over 90 days.

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

iShares India 50  vs.  Franklin FTSE India

iShares India 50

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares India 50 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, IShares India is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin FTSE India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin FTSE India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Franklin FTSE is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares India and Franklin FTSE

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

The idea behind iShares India 50 and Franklin FTSE India 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.