Correlation Between Invesco SP and Franklin LibertyQ

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

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

Diversification Opportunities for Invesco SP and Franklin LibertyQ

0.98

Correlation Coefficient

Invesco SP  Franklin LibertyQ

Almost no diversification

The 3 months correlation between Invesco and Franklin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP SmallCap 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 Invesco SP 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 Invesco SP SmallCap 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 Invesco SP i.e., Invesco SP and Franklin LibertyQ go up and down completely randomly.

Pair Corralation between Invesco SP and Franklin LibertyQ

Given the investment horizon of 90 days Invesco SP SmallCap is expected to under-perform the Franklin LibertyQ. In addition to that, Invesco SP is 1.19 times more volatile than Franklin LibertyQ Small. It trades about -0.08 of its total potential returns per unit of risk. Franklin LibertyQ Small is currently generating about -0.08 per unit of volatility. If you would invest  4,168  in Franklin LibertyQ Small on December 21, 2024 and sell it today you would lose (205.70) from holding Franklin LibertyQ Small or give up 4.94% of portfolio value over 90 days.

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

Invesco SP SmallCap  vs.  Franklin LibertyQ Small

Invesco SP SmallCap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP SmallCap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Invesco SP is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Franklin LibertyQ Small

Risk-Adjusted Performance

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 Invesco SP and Franklin LibertyQ

The main advantage of trading using opposite Invesco SP and Franklin LibertyQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP 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 Invesco SP SmallCap 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.