Correlation Between Templeton World and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Templeton World 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 Templeton World and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Templeton World Fund and Franklin Lifesmart 2040, you can compare the effects of market volatilities on Templeton World 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 Templeton World with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton World and Franklin Lifesmart.
Diversification Opportunities for Templeton World and Franklin Lifesmart
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Templeton and Franklin is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Templeton World Fund and Franklin Lifesmart 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2040 and Templeton World 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 Templeton World Fund 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 2040 has no effect on the direction of Templeton World i.e., Templeton World and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Templeton World and Franklin Lifesmart
Assuming the 90 days horizon Templeton World Fund is expected to under-perform the Franklin Lifesmart. In addition to that, Templeton World is 1.95 times more volatile than Franklin Lifesmart 2040. It trades about -0.07 of its total potential returns per unit of risk. Franklin Lifesmart 2040 is currently generating about -0.03 per unit of volatility. If you would invest 1,457 in Franklin Lifesmart 2040 on September 24, 2024 and sell it today you would lose (17.00) from holding Franklin Lifesmart 2040 or give up 1.17% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Templeton World Fund vs. Franklin Lifesmart 2040
Performance |
Timeline |
Templeton World |
Franklin Lifesmart 2040 |
Templeton World and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Templeton World and Franklin Lifesmart
The main advantage of trading using opposite Templeton World and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton World 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.Templeton World vs. Franklin Mutual Beacon | Templeton World vs. Templeton Developing Markets | Templeton World vs. Franklin Mutual Global | Templeton World vs. Franklin Mutual Global |
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Check out your portfolio center.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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