Correlation Between Vanguard FTSE and Franklin International

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

By analyzing existing cross correlation between Vanguard FTSE All World and Franklin International Core, you can compare the effects of market volatilities on Vanguard FTSE 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 Vanguard FTSE with a short position of Franklin International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Franklin International.

Diversification Opportunities for Vanguard FTSE and Franklin International

0.98

Correlation Coefficient

Vanguard FTSE  Franklin International

Almost no diversification

The 3 months correlation between Vanguard and Franklin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE All World and Franklin International Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin International and Vanguard FTSE 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 Vanguard FTSE All World 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 Vanguard FTSE i.e., Vanguard FTSE and Franklin International go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Franklin International

Considering the 90-day investment horizon Vanguard FTSE All World is expected to generate 1.04 times more return on investment than Franklin International. However, Vanguard FTSE is 1.04 times more volatile than Franklin International Core. It trades about 0.04 of its potential returns per unit of risk. Franklin International Core is currently generating about 0.0 per unit of risk. If you would invest  5,862  in Vanguard FTSE All World on February 7, 2024 and sell it today you would earn a total of  34.00  from holding Vanguard FTSE All World or generate 0.58% return on investment over 90 days.

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

Vanguard FTSE All World  vs.  Franklin International Core

Vanguard FTSE All

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE All World are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Franklin International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin International Core are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Franklin International is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Vanguard FTSE and Franklin International

The main advantage of trading using opposite Vanguard FTSE and Franklin International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 Vanguard FTSE All World 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.