Correlation Between Franklin FTSE and JPMorgan BetaBuilders

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

By analyzing existing cross correlation between Franklin FTSE Brazil and JPMorgan BetaBuilders Japan, you can compare the effects of market volatilities on Franklin FTSE and JPMorgan BetaBuilders 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 FTSE with a short position of JPMorgan BetaBuilders. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin FTSE and JPMorgan BetaBuilders.

Diversification Opportunities for Franklin FTSE and JPMorgan BetaBuilders

0.8

Correlation Coefficient

Franklin FTSE  JPMorgan BetaBuilders

Very poor diversification

The 3 months correlation between Franklin and JPMorgan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Franklin FTSE Brazil and JPMorgan BetaBuilders Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan BetaBuilders and Franklin FTSE 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 FTSE Brazil are associated (or correlated) with JPMorgan BetaBuilders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan BetaBuilders has no effect on the direction of Franklin FTSE i.e., Franklin FTSE and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between Franklin FTSE and JPMorgan BetaBuilders

Given the investment horizon of 90 days Franklin FTSE Brazil is expected to under-perform the JPMorgan BetaBuilders. In addition to that, Franklin FTSE is 1.12 times more volatile than JPMorgan BetaBuilders Japan. It trades about -0.13 of its total potential returns per unit of risk. JPMorgan BetaBuilders Japan is currently generating about -0.08 per unit of volatility. If you would invest  5,954  in JPMorgan BetaBuilders Japan on August 30, 2024 and sell it today you would lose (332.00) from holding JPMorgan BetaBuilders Japan or give up 5.58% of portfolio value over 90 days.

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

Franklin FTSE Brazil  vs.  JPMorgan BetaBuilders Japan

Franklin FTSE Brazil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin FTSE Brazil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

JPMorgan BetaBuilders

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan BetaBuilders Japan has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking indicators, JPMorgan BetaBuilders is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Franklin FTSE and JPMorgan BetaBuilders

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

The idea behind Franklin FTSE Brazil and JPMorgan BetaBuilders Japan 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.