Correlation Between Blackrock and Franklin Lifesmart

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

By analyzing existing cross correlation between Blackrock Sm Cap and Franklin Lifesmart 2055, you can compare the effects of market volatilities on Blackrock 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 Blackrock with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock and Franklin Lifesmart.

Diversification Opportunities for Blackrock and Franklin Lifesmart

0.72

Correlation Coefficient

Blackrock  Franklin Lifesmart

Poor diversification

The 3 months correlation between Blackrock and Franklin is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Sm Cap and Franklin Lifesmart 2055 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2055 and Blackrock 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 Blackrock Sm Cap 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 2055 has no effect on the direction of Blackrock i.e., Blackrock and Franklin Lifesmart go up and down completely randomly.

Pair Corralation between Blackrock and Franklin Lifesmart

Assuming the 90 days horizon Blackrock is expected to generate 1.52 times less return on investment than Franklin Lifesmart. In addition to that, Blackrock is 1.82 times more volatile than Franklin Lifesmart 2055. It trades about 0.03 of its total potential returns per unit of risk. Franklin Lifesmart 2055 is currently generating about 0.09 per unit of volatility. If you would invest  1,121  in Franklin Lifesmart 2055 on September 30, 2024 and sell it today you would earn a total of  300.00  from holding Franklin Lifesmart 2055 or generate 26.76% return on investment over 90 days.

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

Blackrock Sm Cap  vs.  Franklin Lifesmart 2055

Blackrock Sm Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Sm Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Blackrock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Lifesmart 2055

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Lifesmart 2055 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, 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 Blackrock and Franklin Lifesmart

The main advantage of trading using opposite Blackrock and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackrock 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 Blackrock Sm Cap and Franklin Lifesmart 2055 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.