Correlation Between Franklin Liberty and FlexShares Ready

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

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

Diversification Opportunities for Franklin Liberty and FlexShares Ready

0.91

Correlation Coefficient

Franklin Liberty  FlexShares Ready

Almost no diversification

The 3 months correlation between Franklin and FlexShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Short and FlexShares Ready Access in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Ready Access and Franklin Liberty 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 Liberty Short are associated (or correlated) with FlexShares Ready. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Ready Access has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and FlexShares Ready go up and down completely randomly.

Pair Corralation between Franklin Liberty and FlexShares Ready

Given the investment horizon of 90 days Franklin Liberty Short is expected to generate 6.45 times more return on investment than FlexShares Ready. However, Franklin Liberty is 6.45 times more volatile than FlexShares Ready Access. It trades about 0.19 of its potential returns per unit of risk. FlexShares Ready Access is currently generating about 0.87 per unit of risk. If you would invest  8,933  in Franklin Liberty Short on February 21, 2024 and sell it today you would earn a total of  55.00  from holding Franklin Liberty Short or generate 0.62% return on investment over 90 days.

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

Franklin Liberty Short  vs.  FlexShares Ready Access

Franklin Liberty Short

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Short are ranked lower than 13 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

FlexShares Ready Access

Risk-Adjusted Performance

65 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Ready Access are ranked lower than 65 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, FlexShares Ready is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Franklin Liberty and FlexShares Ready

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

The idea behind Franklin Liberty Short and FlexShares Ready Access 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.