Correlation Between Franklin Templeton and Invesco Quality

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

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

Diversification Opportunities for Franklin Templeton and Invesco Quality

-0.22

Correlation Coefficient

Franklin Templeton  Invesco Quality

Very good diversification

The 3 months correlation between Franklin and Invesco is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Templeton ETF and Invesco Quality Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Quality Municipal and Franklin Templeton 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 Templeton ETF are associated (or correlated) with Invesco Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Quality Municipal has no effect on the direction of Franklin Templeton i.e., Franklin Templeton and Invesco Quality go up and down completely randomly.

Pair Corralation between Franklin Templeton and Invesco Quality

Considering the 90-day investment horizon Franklin Templeton ETF is expected to generate 1.93 times more return on investment than Invesco Quality. However, Franklin Templeton is 1.93 times more volatile than Invesco Quality Municipal. It trades about 0.26 of its potential returns per unit of risk. Invesco Quality Municipal is currently generating about 0.1 per unit of risk. If you would invest  6,561  in Franklin Templeton ETF on September 17, 2024 and sell it today you would earn a total of  356.00  from holding Franklin Templeton ETF or generate 5.43% return on investment over 90 days.

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

Franklin Templeton ETF  vs.  Invesco Quality Municipal

Franklin Templeton ETF

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Templeton ETF are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Franklin Templeton displayed solid returns over the last few months and may actually be approaching a breakup point.

Invesco Quality Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Quality Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Invesco Quality is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Franklin Templeton and Invesco Quality

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

The idea behind Franklin Templeton ETF and Invesco Quality Municipal 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.