Correlation Between Davis Financial and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Davis Financial and Franklin Lifesmart 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 Davis Financial and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Davis Financial Fund and Franklin Lifesmart 2035, you can compare the effects of market volatilities on Davis Financial and Franklin Lifesmart 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 Davis Financial with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Financial and Franklin Lifesmart.
Diversification Opportunities for Davis Financial and Franklin Lifesmart
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Davis and Franklin is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Franklin Lifesmart 2035 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2035 and Davis Financial 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 Davis Financial Fund are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2035 has no effect on the direction of Davis Financial i.e., Davis Financial and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Davis Financial and Franklin Lifesmart
Assuming the 90 days horizon Davis Financial Fund is expected to under-perform the Franklin Lifesmart. In addition to that, Davis Financial is 2.13 times more volatile than Franklin Lifesmart 2035. It trades about -0.37 of its total potential returns per unit of risk. Franklin Lifesmart 2035 is currently generating about -0.14 per unit of volatility. If you would invest 1,450 in Franklin Lifesmart 2035 on September 24, 2024 and sell it today you would lose (24.00) from holding Franklin Lifesmart 2035 or give up 1.66% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.24% |
Values | Daily Returns |
Davis Financial Fund vs. Franklin Lifesmart 2035
Performance |
Timeline |
Davis Financial |
Franklin Lifesmart 2035 |
Davis Financial and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Davis Financial and Franklin Lifesmart
The main advantage of trading using opposite Davis Financial and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Financial position performs unexpectedly, Franklin Lifesmart 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 Lifesmart will offset losses from the drop in Franklin Lifesmart's long position.Davis Financial vs. Cb Large Cap | Davis Financial vs. Dunham Large Cap | Davis Financial vs. Large Cap Growth Profund | Davis Financial vs. Pace Large Value |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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