Correlation Between Vanguard Intermediate and Franklin Templeton

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

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

Diversification Opportunities for Vanguard Intermediate and Franklin Templeton

1.0

Correlation Coefficient

Vanguard Intermediate  Franklin Templeton

No risk reduction

The 3 months correlation between Vanguard and Franklin is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Bon 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 Vanguard Intermediate 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 Vanguard Intermediate Term Bond 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 Vanguard Intermediate i.e., Vanguard Intermediate and Franklin Templeton go up and down completely randomly.

Pair Corralation between Vanguard Intermediate and Franklin Templeton

Considering the 90-day investment horizon Vanguard Intermediate Term Bond is expected to under-perform the Franklin Templeton. In addition to that, Vanguard Intermediate is 1.01 times more volatile than Franklin Templeton ETF. It trades about -0.03 of its total potential returns per unit of risk. Franklin Templeton ETF is currently generating about -0.02 per unit of volatility. If you would invest  2,156  in Franklin Templeton ETF on August 30, 2024 and sell it today you would lose (8.00) from holding Franklin Templeton ETF or give up 0.37% of portfolio value over 90 days.

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

Vanguard Intermediate Term Bon  vs.  Franklin Templeton ETF

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Intermediate Term Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Vanguard Intermediate is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Franklin Templeton ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Templeton ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Franklin Templeton is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Intermediate and Franklin Templeton

The main advantage of trading using opposite Vanguard Intermediate and Franklin Templeton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Intermediate 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 Vanguard Intermediate Term Bond 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.