Correlation Between IShares Inflation and Franklin Liberty

Can any of the company-specific risk be diversified away by investing in both IShares Inflation 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 Inflation 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 Inflation Hedged and Franklin Liberty Ultra, you can compare the effects of market volatilities on IShares Inflation 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 Inflation with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Inflation and Franklin Liberty.

Diversification Opportunities for IShares Inflation and Franklin Liberty

-0.38

Correlation Coefficient

IShares Inflation  Franklin Liberty

Very good diversification

The 3 months correlation between IShares and Franklin is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding iShares Inflation Hedged and Franklin Liberty Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Ultra and IShares Inflation 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 Inflation Hedged 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 Ultra has no effect on the direction of IShares Inflation i.e., IShares Inflation and Franklin Liberty go up and down completely randomly.

Pair Corralation between IShares Inflation and Franklin Liberty

Given the investment horizon of 90 days IShares Inflation is expected to generate 1.27 times less return on investment than Franklin Liberty. In addition to that, IShares Inflation is 2.64 times more volatile than Franklin Liberty Ultra. It trades about 0.04 of its total potential returns per unit of risk. Franklin Liberty Ultra is currently generating about 0.13 per unit of volatility. If you would invest  2,463  in Franklin Liberty Ultra on September 3, 2024 and sell it today you would earn a total of  30.00  from holding Franklin Liberty Ultra or generate 1.22% return on investment over 90 days.

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

iShares Inflation Hedged  vs.  Franklin Liberty Ultra

iShares Inflation Hedged

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Inflation Hedged are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, IShares Inflation is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Franklin Liberty Ultra

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Ultra are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Inflation and Franklin Liberty

The main advantage of trading using opposite IShares Inflation and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Inflation 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 Inflation Hedged and Franklin Liberty Ultra 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.