Correlation Between IShares 0 and Franklin Liberty

Can any of the company-specific risk be diversified away by investing in both IShares 0 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 IShares 0 and Franklin Liberty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 0 5 Year and Franklin Liberty High, you can compare the effects of market volatilities on IShares 0 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 IShares 0 with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 0 and Franklin Liberty.

Diversification Opportunities for IShares 0 and Franklin Liberty

0.83

Correlation Coefficient

IShares 0  Franklin Liberty

Very poor diversification

The 3 months correlation between IShares and Franklin is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares 0 5 Year and Franklin Liberty High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty High and IShares 0 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 iShares 0 5 Year 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 High has no effect on the direction of IShares 0 i.e., IShares 0 and Franklin Liberty go up and down completely randomly.

Pair Corralation between IShares 0 and Franklin Liberty

Given the investment horizon of 90 days IShares 0 is expected to generate 1.07 times less return on investment than Franklin Liberty. But when comparing it to its historical volatility, iShares 0 5 Year is 1.12 times less risky than Franklin Liberty. It trades about 0.07 of its potential returns per unit of risk. Franklin Liberty High is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,361  in Franklin Liberty High on December 30, 2024 and sell it today you would earn a total of  24.00  from holding Franklin Liberty High or generate 1.02% return on investment over 90 days.

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

iShares 0 5 Year  vs.  Franklin Liberty High

iShares 0 5

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 0 5 Year are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares 0 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Franklin Liberty High

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty High are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares 0 and Franklin Liberty

The main advantage of trading using opposite IShares 0 and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 0 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 iShares 0 5 Year and Franklin Liberty High 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.