Correlation Between Franklin Core and ETF Series

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

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

Diversification Opportunities for Franklin Core and ETF Series

0.8

Correlation Coefficient

Franklin Core  ETF Series

Very poor diversification

The 3 months correlation between Franklin and ETF is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Core Dividend and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions and Franklin 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 Franklin Core Dividend are associated (or correlated) with ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of Franklin Core i.e., Franklin Core and ETF Series go up and down completely randomly.

Pair Corralation between Franklin Core and ETF Series

Given the investment horizon of 90 days Franklin Core is expected to generate 1.16 times less return on investment than ETF Series. But when comparing it to its historical volatility, Franklin Core Dividend is 1.73 times less risky than ETF Series. It trades about 0.11 of its potential returns per unit of risk. ETF Series Solutions is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,486  in ETF Series Solutions on October 12, 2024 and sell it today you would earn a total of  1,402  from holding ETF Series Solutions or generate 56.4% return on investment over 90 days.

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

Franklin Core Dividend  vs.  ETF Series Solutions

Franklin Core Dividend

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Core Dividend are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, Franklin Core is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ETF Series Solutions

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ETF Series Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, ETF Series may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Franklin Core and ETF Series

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

The idea behind Franklin Core Dividend and ETF Series Solutions 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.