Correlation Between Franklin Libertyshares and SPDR SP

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

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

Diversification Opportunities for Franklin Libertyshares and SPDR SP

0.45

Correlation Coefficient

Franklin Libertyshares  SPDR SP

Very weak diversification

The 3 months correlation between Franklin and SPDR is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Libertyshares ICAV and SPDR SP Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Materials and Franklin Libertyshares 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 Libertyshares ICAV are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Materials has no effect on the direction of Franklin Libertyshares i.e., Franklin Libertyshares and SPDR SP go up and down completely randomly.

Pair Corralation between Franklin Libertyshares and SPDR SP

Assuming the 90 days trading horizon Franklin Libertyshares ICAV is expected to generate 1.14 times more return on investment than SPDR SP. However, Franklin Libertyshares is 1.14 times more volatile than SPDR SP Materials. It trades about 0.02 of its potential returns per unit of risk. SPDR SP Materials is currently generating about -0.1 per unit of risk. If you would invest  2,783  in Franklin Libertyshares ICAV on December 2, 2024 and sell it today you would earn a total of  22.00  from holding Franklin Libertyshares ICAV or generate 0.79% return on investment over 90 days.

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

Franklin Libertyshares ICAV  vs.  SPDR SP Materials

Franklin Libertyshares

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Libertyshares ICAV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Franklin Libertyshares is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR SP Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SPDR SP 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 Franklin Libertyshares and SPDR SP

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

The idea behind Franklin Libertyshares ICAV and SPDR SP Materials 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.