Correlation Between VanEck Short and Franklin Liberty

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

By analyzing existing cross correlation between VanEck Short High and Franklin Liberty Intermediate, you can compare the effects of market volatilities on VanEck Short and Franklin Liberty 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 VanEck Short with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Short and Franklin Liberty.

Diversification Opportunities for VanEck Short and Franklin Liberty

0.59

Correlation Coefficient

VanEck Short  Franklin Liberty

Very weak diversification

The 3 months correlation between VanEck and Franklin is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Short High and Franklin Liberty Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Int and VanEck Short 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 VanEck Short High are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Int has no effect on the direction of VanEck Short i.e., VanEck Short and Franklin Liberty go up and down completely randomly.

Pair Corralation between VanEck Short and Franklin Liberty

Given the investment horizon of 90 days VanEck Short High is expected to generate 0.85 times more return on investment than Franklin Liberty. However, VanEck Short High is 1.18 times less risky than Franklin Liberty. It trades about -0.01 of its potential returns per unit of risk. Franklin Liberty Intermediate is currently generating about -0.04 per unit of risk. If you would invest  2,263  in VanEck Short High on September 26, 2024 and sell it today you would lose (4.00) from holding VanEck Short High or give up 0.18% of portfolio value over 90 days.

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

VanEck Short High  vs.  Franklin Liberty Intermediate

VanEck Short High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Short High has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, VanEck Short is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Franklin Liberty Int

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Liberty Intermediate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with VanEck Short and Franklin Liberty

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

The idea behind VanEck Short High and Franklin Liberty Intermediate 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.