Correlation Between Franklin International and ALPS Emerging

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

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

Diversification Opportunities for Franklin International and ALPS Emerging

0.39

Correlation Coefficient

Franklin International  ALPS Emerging

Weak diversification

The 3 months correlation between Franklin and ALPS is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Franklin International Low and ALPS Emerging Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS Emerging Sector and Franklin International 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 International Low are associated (or correlated) with ALPS Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS Emerging Sector has no effect on the direction of Franklin International i.e., Franklin International and ALPS Emerging go up and down completely randomly.

Pair Corralation between Franklin International and ALPS Emerging

Given the investment horizon of 90 days Franklin International Low is expected to generate 0.7 times more return on investment than ALPS Emerging. However, Franklin International Low is 1.43 times less risky than ALPS Emerging. It trades about 0.12 of its potential returns per unit of risk. ALPS Emerging Sector is currently generating about 0.04 per unit of risk. If you would invest  2,516  in Franklin International Low on October 1, 2024 and sell it today you would earn a total of  519.00  from holding Franklin International Low or generate 20.63% return on investment over 90 days.

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

Franklin International Low  vs.  ALPS Emerging Sector

Franklin International

Risk-Adjusted Performance

0 of 100

Very Weak

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

ALPS Emerging Sector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPS Emerging Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with Franklin International and ALPS Emerging

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

The idea behind Franklin International Low and ALPS Emerging Sector 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.