Correlation Between IShares Core and Franklin International
Can any of the company-specific risk be diversified away by investing in both IShares Core and Franklin International 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 Core and Franklin International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core MSCI and Franklin International Core, you can compare the effects of market volatilities on IShares Core and Franklin International 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 Core with a short position of Franklin International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Franklin International.
Diversification Opportunities for IShares Core and Franklin International
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Franklin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Franklin International Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin International and IShares Core 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 Core MSCI are associated (or correlated) with Franklin International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin International has no effect on the direction of IShares Core i.e., IShares Core and Franklin International go up and down completely randomly.
Pair Corralation between IShares Core and Franklin International
Given the investment horizon of 90 days iShares Core MSCI is expected to generate 0.99 times more return on investment than Franklin International. However, iShares Core MSCI is 1.01 times less risky than Franklin International. It trades about 0.03 of its potential returns per unit of risk. Franklin International Core is currently generating about -0.02 per unit of risk. If you would invest 6,734 in iShares Core MSCI on February 7, 2024 and sell it today you would earn a total of 56.00 from holding iShares Core MSCI or generate 0.83% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
iShares Core MSCI vs. Franklin International Core
Performance |
Timeline |
iShares Core MSCI |
Franklin International |
IShares Core and Franklin International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares Core and Franklin International
The main advantage of trading using opposite IShares Core and Franklin International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, Franklin International 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 International will offset losses from the drop in Franklin International's long position.The idea behind iShares Core MSCI and Franklin International Core 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.Franklin International vs. Morningstar Unconstrained Allocation | Franklin International vs. Via Renewables |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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