Correlation Between Freedom Day and Franklin International

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

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

Diversification Opportunities for Freedom Day and Franklin International

0.67

Correlation Coefficient

Freedom Day  Franklin International

Poor diversification

The 3 months correlation between Freedom and Franklin is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Day Dividend and Franklin International Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin International and Freedom Day 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 Freedom Day Dividend are associated (or correlated) with Franklin International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin International has no effect on the direction of Freedom Day i.e., Freedom Day and Franklin International go up and down completely randomly.

Pair Corralation between Freedom Day and Franklin International

Given the investment horizon of 90 days Freedom Day Dividend is expected to under-perform the Franklin International. But the etf apears to be less risky and, when comparing its historical volatility, Freedom Day Dividend is 1.0 times less risky than Franklin International. The etf trades about -0.06 of its potential returns per unit of risk. The Franklin International Core is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,082  in Franklin International Core on November 28, 2024 and sell it today you would earn a total of  193.00  from holding Franklin International Core or generate 6.26% return on investment over 90 days.

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

Freedom Day Dividend  vs.  Franklin International Core

Freedom Day Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freedom Day Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Freedom Day is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Franklin International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin International Core are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Franklin International may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Freedom Day and Franklin International

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

The idea behind Freedom Day Dividend and Franklin International Core 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.