Correlation Between Franklin Libertyshares and Home Depot

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

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

Diversification Opportunities for Franklin Libertyshares and Home Depot

-0.26

Correlation Coefficient

Franklin Libertyshares  Home Depot

Very good diversification

The 3 months correlation between Franklin and Home is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Libertyshares ICAV and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot and Franklin Libertyshares 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 Franklin Libertyshares ICAV are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Franklin Libertyshares i.e., Franklin Libertyshares and Home Depot go up and down completely randomly.

Pair Corralation between Franklin Libertyshares and Home Depot

Assuming the 90 days trading horizon Franklin Libertyshares ICAV is expected to generate 6.15 times more return on investment than Home Depot. However, Franklin Libertyshares is 6.15 times more volatile than Home Depot. It trades about 0.05 of its potential returns per unit of risk. Home Depot is currently generating about 0.13 per unit of risk. If you would invest  2,772  in Franklin Libertyshares ICAV on September 12, 2024 and sell it today you would earn a total of  77.00  from holding Franklin Libertyshares ICAV or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Franklin Libertyshares ICAV  vs.  Home Depot

Franklin Libertyshares

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Libertyshares ICAV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Franklin Libertyshares is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Home Depot

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Home Depot is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Franklin Libertyshares and Home Depot

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

The idea behind Franklin Libertyshares ICAV and Home Depot 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.