Correlation Between Visa and Franklin LibertyQ

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

By analyzing existing cross correlation between Visa Class A and Franklin LibertyQ Small, you can compare the effects of market volatilities on Visa and Franklin LibertyQ 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 Visa with a short position of Franklin LibertyQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Franklin LibertyQ.

Diversification Opportunities for Visa and Franklin LibertyQ

0.52

Correlation Coefficient

Visa  Franklin LibertyQ

Very weak diversification

The 3 months correlation between Visa and Franklin is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Franklin LibertyQ Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin LibertyQ Small and Visa 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 Visa Class A are associated (or correlated) with Franklin LibertyQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin LibertyQ Small has no effect on the direction of Visa i.e., Visa and Franklin LibertyQ go up and down completely randomly.

Pair Corralation between Visa and Franklin LibertyQ

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.9 times more return on investment than Franklin LibertyQ. However, Visa Class A is 1.11 times less risky than Franklin LibertyQ. It trades about 0.07 of its potential returns per unit of risk. Franklin LibertyQ Small is currently generating about 0.05 per unit of risk. If you would invest  22,085  in Visa Class A on October 11, 2024 and sell it today you would earn a total of  9,175  from holding Visa Class A or generate 41.54% return on investment over 90 days.

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

Visa Class A  vs.  Franklin LibertyQ Small

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Franklin LibertyQ Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin LibertyQ Small has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Franklin LibertyQ is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Visa and Franklin LibertyQ

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

The idea behind Visa Class A and Franklin LibertyQ Small 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.