Correlation Between IShares Treasury and Franklin Liberty

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

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

Diversification Opportunities for IShares Treasury and Franklin Liberty

0.96

Correlation Coefficient

IShares Treasury  Franklin Liberty

Almost no diversification

The 3 months correlation between IShares and Franklin is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Bond and Franklin Liberty Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Treasury and IShares Treasury 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 iShares Treasury Bond are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Treasury has no effect on the direction of IShares Treasury i.e., IShares Treasury and Franklin Liberty go up and down completely randomly.

Pair Corralation between IShares Treasury and Franklin Liberty

Given the investment horizon of 90 days iShares Treasury Bond is expected to generate 0.99 times more return on investment than Franklin Liberty. However, iShares Treasury Bond is 1.01 times less risky than Franklin Liberty. It trades about -0.04 of its potential returns per unit of risk. Franklin Liberty Treasury is currently generating about -0.04 per unit of risk. If you would invest  2,305  in iShares Treasury Bond on August 30, 2024 and sell it today you would lose (18.00) from holding iShares Treasury Bond or give up 0.78% of portfolio value over 90 days.

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

iShares Treasury Bond  vs.  Franklin Liberty Treasury

iShares Treasury Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Treasury Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Treasury is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Treasury and Franklin Liberty

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

The idea behind iShares Treasury Bond and Franklin Liberty Treasury 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.