Correlation Between Franklin Templeton and Essential

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

By analyzing existing cross correlation between Franklin Templeton ETF and Essential 40 Stock, you can compare the effects of market volatilities on Franklin Templeton and Essential 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 Templeton with a short position of Essential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Templeton and Essential.

Diversification Opportunities for Franklin Templeton and Essential

-0.04

Correlation Coefficient

Franklin Templeton  Essential

Good diversification

The 3 months correlation between Franklin and Essential is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Templeton ETF and Essential 40 Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential 40 Stock and Franklin Templeton 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 Templeton ETF are associated (or correlated) with Essential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential 40 Stock has no effect on the direction of Franklin Templeton i.e., Franklin Templeton and Essential go up and down completely randomly.

Pair Corralation between Franklin Templeton and Essential

Given the investment horizon of 90 days Franklin Templeton ETF is expected to generate 2.07 times more return on investment than Essential. However, Franklin Templeton is 2.07 times more volatile than Essential 40 Stock. It trades about 0.06 of its potential returns per unit of risk. Essential 40 Stock is currently generating about 0.06 per unit of risk. If you would invest  2,629  in Franklin Templeton ETF on September 12, 2024 and sell it today you would earn a total of  106.00  from holding Franklin Templeton ETF or generate 4.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

Franklin Templeton ETF  vs.  Essential 40 Stock

Franklin Templeton ETF

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Templeton ETF are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Franklin Templeton is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Essential 40 Stock

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Essential 40 Stock are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Essential is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Franklin Templeton and Essential

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

The idea behind Franklin Templeton ETF and Essential 40 Stock 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.