Correlation Between IXSE and Franklin FTSE

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

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

Diversification Opportunities for IXSE and Franklin FTSE

-0.82

Correlation Coefficient

IXSE  Franklin FTSE

Pay attention - limited upside

The 3 months correlation between IXSE and Franklin is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding IXSE 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 IXSE 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 IXSE 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 IXSE i.e., IXSE and Franklin FTSE go up and down completely randomly.

Pair Corralation between IXSE and Franklin FTSE

Given the investment horizon of 90 days IXSE is expected to generate 1.64 times less return on investment than Franklin FTSE. But when comparing it to its historical volatility, IXSE is 1.16 times less risky than Franklin FTSE. It trades about 0.06 of its potential returns per unit of risk. Franklin FTSE India is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,906  in Franklin FTSE India on September 5, 2024 and sell it today you would earn a total of  1,053  from holding Franklin FTSE India or generate 36.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	30.51%
Values	Daily Returns

IXSE  vs.  Franklin FTSE India

IXSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IXSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IXSE is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Franklin FTSE India

Risk-Adjusted Performance

0 of 100

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 IXSE and Franklin FTSE

The main advantage of trading using opposite IXSE and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IXSE 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 IXSE 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.