Correlation Between Franklin International and WisdomTree International

Can any of the company-specific risk be diversified away by investing in both Franklin International and WisdomTree International 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 WisdomTree International 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 WisdomTree International Hedged, you can compare the effects of market volatilities on Franklin International and WisdomTree International 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 WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin International and WisdomTree International.

Diversification Opportunities for Franklin International and WisdomTree International

0.48

Correlation Coefficient

Franklin International  WisdomTree International

Very weak diversification

The 3 months correlation between Franklin and WisdomTree is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Franklin International Low and WisdomTree International Hedge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International 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 WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of Franklin International i.e., Franklin International and WisdomTree International go up and down completely randomly.

Pair Corralation between Franklin International and WisdomTree International

Given the investment horizon of 90 days Franklin International Low is expected to under-perform the WisdomTree International. But the etf apears to be less risky and, when comparing its historical volatility, Franklin International Low is 1.35 times less risky than WisdomTree International. The etf trades about -0.13 of its potential returns per unit of risk. The WisdomTree International Hedged is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,355  in WisdomTree International Hedged on September 21, 2024 and sell it today you would lose (7.00) from holding WisdomTree International Hedged or give up 0.16% of portfolio value over 90 days.

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

Franklin International Low  vs.  WisdomTree International Hedge

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.

WisdomTree International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree International Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, WisdomTree International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Franklin International and WisdomTree International

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

The idea behind Franklin International Low and WisdomTree International Hedged 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.