Correlation Between Invesco Technology and Franklin Strategic

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

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

Diversification Opportunities for Invesco Technology and Franklin Strategic

0.24

Correlation Coefficient

Invesco Technology  Franklin Strategic

Modest diversification

The 3 months correlation between Invesco and Franklin is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Technology Fund and Franklin Strategic Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Strategic Series and Invesco Technology 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 Invesco Technology Fund are associated (or correlated) with Franklin Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Strategic Series has no effect on the direction of Invesco Technology i.e., Invesco Technology and Franklin Strategic go up and down completely randomly.

Pair Corralation between Invesco Technology and Franklin Strategic

Assuming the 90 days horizon Invesco Technology Fund is expected to generate 4.39 times more return on investment than Franklin Strategic. However, Invesco Technology is 4.39 times more volatile than Franklin Strategic Series. It trades about 0.08 of its potential returns per unit of risk. Franklin Strategic Series is currently generating about 0.08 per unit of risk. If you would invest  3,822  in Invesco Technology Fund on October 9, 2024 and sell it today you would earn a total of  2,939  from holding Invesco Technology Fund or generate 76.9% return on investment over 90 days.

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

Invesco Technology Fund  vs.  Franklin Strategic Series

Invesco Technology

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Technology Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Invesco Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Strategic Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Strategic Series has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Franklin Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco Technology and Franklin Strategic

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

The idea behind Invesco Technology Fund and Franklin Strategic Series 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 Global Correlations module to find global opportunities by holding instruments from different markets.