Correlation Between The Gabelli and Franklin Lifesmart

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

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

Diversification Opportunities for The Gabelli and Franklin Lifesmart

0.81

Correlation Coefficient

The Gabelli  Franklin Lifesmart

Very poor diversification

The 3 months correlation between The and Franklin is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Small and Franklin Lifesmart Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart and The Gabelli 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 The Gabelli Small 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 has no effect on the direction of The Gabelli i.e., The Gabelli and Franklin Lifesmart go up and down completely randomly.

Pair Corralation between The Gabelli and Franklin Lifesmart

Assuming the 90 days horizon The Gabelli Small is expected to generate 5.02 times more return on investment than Franklin Lifesmart. However, The Gabelli is 5.02 times more volatile than Franklin Lifesmart Retirement. It trades about 0.08 of its potential returns per unit of risk. Franklin Lifesmart Retirement is currently generating about 0.13 per unit of risk. If you would invest  4,431  in The Gabelli Small on September 5, 2024 and sell it today you would earn a total of  291.00  from holding The Gabelli Small or generate 6.57% return on investment over 90 days.

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

The Gabelli Small  vs.  Franklin Lifesmart Retirement

Gabelli Small

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Small are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, The Gabelli may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Franklin Lifesmart

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Lifesmart Retirement are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental 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 The Gabelli and Franklin Lifesmart

The main advantage of trading using opposite The Gabelli and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Gabelli 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 The Gabelli Small and Franklin Lifesmart Retirement 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.