Correlation Between Franklin Liberty and Pacer Trendpilot

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

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

Diversification Opportunities for Franklin Liberty and Pacer Trendpilot

0.87

Correlation Coefficient

Franklin Liberty  Pacer Trendpilot

Very poor diversification

The 3 months correlation between Franklin and Pacer is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Investment and Pacer Trendpilot Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Trendpilot Bond and Franklin Liberty 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 Liberty Investment are associated (or correlated) with Pacer Trendpilot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Trendpilot Bond has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Pacer Trendpilot go up and down completely randomly.

Pair Corralation between Franklin Liberty and Pacer Trendpilot

Given the investment horizon of 90 days Franklin Liberty Investment is expected to under-perform the Pacer Trendpilot. In addition to that, Franklin Liberty is 1.4 times more volatile than Pacer Trendpilot Bond. It trades about -0.08 of its total potential returns per unit of risk. Pacer Trendpilot Bond is currently generating about -0.1 per unit of volatility. If you would invest  2,061  in Pacer Trendpilot Bond on September 13, 2024 and sell it today you would lose (31.00) from holding Pacer Trendpilot Bond or give up 1.5% of portfolio value over 90 days.

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

Franklin Liberty Investment  vs.  Pacer Trendpilot Bond

Franklin Liberty Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Liberty Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Franklin Liberty is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pacer Trendpilot Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacer Trendpilot Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Pacer Trendpilot is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Franklin Liberty and Pacer Trendpilot

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

The idea behind Franklin Liberty Investment and Pacer Trendpilot Bond 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.