Correlation Between SPDR Bloomberg and Franklin Liberty

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

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

Diversification Opportunities for SPDR Bloomberg and Franklin Liberty

0.92

Correlation Coefficient

SPDR Bloomberg  Franklin Liberty

Almost no diversification

The 3 months correlation between SPDR and Franklin is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg High and Franklin Liberty High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty High and SPDR Bloomberg 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 SPDR Bloomberg High 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 High has no effect on the direction of SPDR Bloomberg i.e., SPDR Bloomberg and Franklin Liberty go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and Franklin Liberty

Considering the 90-day investment horizon SPDR Bloomberg High is expected to generate 1.1 times more return on investment than Franklin Liberty. However, SPDR Bloomberg is 1.1 times more volatile than Franklin Liberty High. It trades about 0.19 of its potential returns per unit of risk. Franklin Liberty High is currently generating about 0.12 per unit of risk. If you would invest  9,489  in SPDR Bloomberg High on September 1, 2024 and sell it today you would earn a total of  247.00  from holding SPDR Bloomberg High or generate 2.6% return on investment over 90 days.

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

SPDR Bloomberg High  vs.  Franklin Liberty High

SPDR Bloomberg High

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg High are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Franklin Liberty High

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty High are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR Bloomberg and Franklin Liberty

The main advantage of trading using opposite SPDR Bloomberg and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Bloomberg 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 SPDR Bloomberg High and Franklin Liberty High 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.