Correlation Between Arrow Dwa and Franklin Lifesmart

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

By analyzing existing cross correlation between Arrow Dwa Tactical and Franklin Lifesmart 2050, you can compare the effects of market volatilities on Arrow Dwa and Franklin Lifesmart 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 Arrow Dwa with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Dwa and Franklin Lifesmart.

Diversification Opportunities for Arrow Dwa and Franklin Lifesmart

0.9

Correlation Coefficient

Arrow Dwa  Franklin Lifesmart

Almost no diversification

The 3 months correlation between Arrow and Franklin is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Dwa Tactical and Franklin Lifesmart 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2050 and Arrow Dwa 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 Arrow Dwa Tactical are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2050 has no effect on the direction of Arrow Dwa i.e., Arrow Dwa and Franklin Lifesmart go up and down completely randomly.

Pair Corralation between Arrow Dwa and Franklin Lifesmart

Assuming the 90 days horizon Arrow Dwa Tactical is expected to generate 0.97 times more return on investment than Franklin Lifesmart. However, Arrow Dwa Tactical is 1.03 times less risky than Franklin Lifesmart. It trades about 0.18 of its potential returns per unit of risk. Franklin Lifesmart 2050 is currently generating about 0.13 per unit of risk. If you would invest  814.00  in Arrow Dwa Tactical on September 12, 2024 and sell it today you would earn a total of  53.00  from holding Arrow Dwa Tactical or generate 6.51% return on investment over 90 days.

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

Arrow Dwa Tactical  vs.  Franklin Lifesmart 2050

Arrow Dwa Tactical

Risk-Adjusted Performance

14 of 100

Good

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

Franklin Lifesmart 2050

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Lifesmart 2050 are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Lifesmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arrow Dwa and Franklin Lifesmart

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

The idea behind Arrow Dwa Tactical and Franklin Lifesmart 2050 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..