Correlation Between Sierra Core and Franklin Lifesmart

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

By analyzing existing cross correlation between Sierra E Retirement and Franklin Lifesmart Retirement, you can compare the effects of market volatilities on Sierra Core 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 Sierra Core with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra Core and Franklin Lifesmart.

Diversification Opportunities for Sierra Core and Franklin Lifesmart

0.56

Correlation Coefficient

Sierra Core  Franklin Lifesmart

Very weak diversification

The 3 months correlation between Sierra and Franklin is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Franklin Lifesmart Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart and Sierra Core 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 Sierra E Retirement 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 has no effect on the direction of Sierra Core i.e., Sierra Core and Franklin Lifesmart go up and down completely randomly.

Pair Corralation between Sierra Core and Franklin Lifesmart

Assuming the 90 days horizon Sierra E Retirement is expected to under-perform the Franklin Lifesmart. In addition to that, Sierra Core is 1.08 times more volatile than Franklin Lifesmart Retirement. It trades about -0.06 of its total potential returns per unit of risk. Franklin Lifesmart Retirement is currently generating about 0.05 per unit of volatility. If you would invest  1,045  in Franklin Lifesmart Retirement on December 22, 2024 and sell it today you would earn a total of  12.00  from holding Franklin Lifesmart Retirement or generate 1.15% return on investment over 90 days.

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

Sierra E Retirement  vs.  Franklin Lifesmart Retirement

Sierra E Retirement

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sierra E Retirement has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sierra Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Lifesmart

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Lifesmart Retirement are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Lifesmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sierra Core and Franklin Lifesmart

The main advantage of trading using opposite Sierra Core and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sierra Core 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.

The idea behind Sierra E Retirement and Franklin Lifesmart Retirement 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.