Correlation Between Visa and Franklin Templeton

Can any of the company-specific risk be diversified away by investing in both Visa and Franklin Templeton 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 Templeton 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 Templeton ETF, you can compare the effects of market volatilities on Visa and Franklin Templeton 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 Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Franklin Templeton.

Diversification Opportunities for Visa and Franklin Templeton

0.8

Correlation Coefficient

Visa  Franklin Templeton

Very poor diversification

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

Pair Corralation between Visa and Franklin Templeton

Taking into account the 90-day investment horizon Visa is expected to generate 1.55 times less return on investment than Franklin Templeton. But when comparing it to its historical volatility, Visa Class A is 1.02 times less risky than Franklin Templeton. It trades about 0.11 of its potential returns per unit of risk. Franklin Templeton ETF is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,075  in Franklin Templeton ETF on September 16, 2024 and sell it today you would earn a total of  842.00  from holding Franklin Templeton ETF or generate 13.86% return on investment over 90 days.

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

Visa Class A  vs.  Franklin Templeton ETF

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Franklin Templeton ETF

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Templeton ETF are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Franklin Templeton displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Franklin Templeton

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

The idea behind Visa Class A and Franklin Templeton ETF 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.