Correlation Between Franklin Liberty and IShares IBonds

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

By analyzing existing cross correlation between Franklin Liberty Treasury and iShares iBonds Dec, you can compare the effects of market volatilities on Franklin Liberty and IShares IBonds 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 IShares IBonds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and IShares IBonds.

Diversification Opportunities for Franklin Liberty and IShares IBonds

1.0

Correlation Coefficient

Franklin Liberty  IShares IBonds

No risk reduction

The 3 months correlation between Franklin and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Treasury and iShares iBonds Dec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBonds Dec 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 Treasury are associated (or correlated) with IShares IBonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBonds Dec has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and IShares IBonds go up and down completely randomly.

Pair Corralation between Franklin Liberty and IShares IBonds

Given the investment horizon of 90 days Franklin Liberty Treasury is expected to generate 0.73 times more return on investment than IShares IBonds. However, Franklin Liberty Treasury is 1.38 times less risky than IShares IBonds. It trades about -0.12 of its potential returns per unit of risk. iShares iBonds Dec is currently generating about -0.13 per unit of risk. If you would invest  2,096  in Franklin Liberty Treasury on September 12, 2024 and sell it today you would lose (47.00) from holding Franklin Liberty Treasury or give up 2.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Franklin Liberty Treasury  vs.  iShares iBonds Dec

Franklin Liberty Treasury

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Liberty Treasury has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Franklin Liberty is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares iBonds Dec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares iBonds Dec has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, IShares IBonds is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Franklin Liberty and IShares IBonds

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

The idea behind Franklin Liberty Treasury and iShares iBonds Dec 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.