Correlation Between Russell Equity and Franklin Templeton

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

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

Diversification Opportunities for Russell Equity and Franklin Templeton

0.24

Correlation Coefficient

Russell Equity  Franklin Templeton

Modest diversification

The 3 months correlation between Russell and Franklin is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Russell Equity Income 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 Russell Equity 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 Russell Equity Income 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 Russell Equity i.e., Russell Equity and Franklin Templeton go up and down completely randomly.

Pair Corralation between Russell Equity and Franklin Templeton

Given the investment horizon of 90 days Russell Equity Income is expected to generate 1.92 times more return on investment than Franklin Templeton. However, Russell Equity is 1.92 times more volatile than Franklin Templeton ETF. It trades about 0.1 of its potential returns per unit of risk. Franklin Templeton ETF is currently generating about 0.06 per unit of risk. If you would invest  4,579  in Russell Equity Income on September 12, 2024 and sell it today you would earn a total of  677.00  from holding Russell Equity Income or generate 14.78% return on investment over 90 days.

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

Russell Equity Income  vs.  Franklin Templeton ETF

Russell Equity Income

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Russell Equity Income are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Russell Equity displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Russell Equity and Franklin Templeton

The main advantage of trading using opposite Russell Equity and Franklin Templeton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell Equity 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 Russell Equity Income 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.