Correlation Between WisdomTree Natural and Franklin FTSE

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

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

Diversification Opportunities for WisdomTree Natural and Franklin FTSE

0.09

Correlation Coefficient

WisdomTree Natural  Franklin FTSE

Significant diversification

The 3 months correlation between WisdomTree and Franklin is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Natural Gas and Franklin FTSE Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Asia and WisdomTree Natural 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 WisdomTree Natural Gas 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 Asia has no effect on the direction of WisdomTree Natural i.e., WisdomTree Natural and Franklin FTSE go up and down completely randomly.

Pair Corralation between WisdomTree Natural and Franklin FTSE

Assuming the 90 days trading horizon WisdomTree Natural Gas is expected to under-perform the Franklin FTSE. In addition to that, WisdomTree Natural is 3.52 times more volatile than Franklin FTSE Asia. It trades about -0.1 of its total potential returns per unit of risk. Franklin FTSE Asia is currently generating about 0.05 per unit of volatility. If you would invest  2,039  in Franklin FTSE Asia on September 4, 2024 and sell it today you would earn a total of  434.00  from holding Franklin FTSE Asia or generate 21.28% return on investment over 90 days.

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

WisdomTree Natural Gas  vs.  Franklin FTSE Asia

WisdomTree Natural Gas

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Natural Gas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Natural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Franklin FTSE Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin FTSE Asia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Franklin FTSE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with WisdomTree Natural and Franklin FTSE

The main advantage of trading using opposite WisdomTree Natural and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Natural 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 WisdomTree Natural Gas and Franklin FTSE Asia 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.