Correlation Between IQ Hedge and Franklin Liberty

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

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

Diversification Opportunities for IQ Hedge and Franklin Liberty

0.46

Correlation Coefficient

IQ Hedge  Franklin Liberty

Very weak diversification

The 3 months correlation between QAI and Franklin is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding IQ Hedge Multi Strategy and Franklin Liberty Systematic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Sys and IQ Hedge 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 IQ Hedge Multi Strategy are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Sys has no effect on the direction of IQ Hedge i.e., IQ Hedge and Franklin Liberty go up and down completely randomly.

Pair Corralation between IQ Hedge and Franklin Liberty

Considering the 90-day investment horizon IQ Hedge Multi Strategy is expected to generate 0.41 times more return on investment than Franklin Liberty. However, IQ Hedge Multi Strategy is 2.42 times less risky than Franklin Liberty. It trades about 0.41 of its potential returns per unit of risk. Franklin Liberty Systematic is currently generating about 0.15 per unit of risk. If you would invest  3,196  in IQ Hedge Multi Strategy on September 2, 2024 and sell it today you would earn a total of  66.00  from holding IQ Hedge Multi Strategy or generate 2.07% return on investment over 90 days.

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

IQ Hedge Multi Strategy  vs.  Franklin Liberty Systematic

IQ Hedge Multi

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IQ Hedge Multi Strategy are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IQ Hedge is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Franklin Liberty Sys

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Systematic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Franklin Liberty is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IQ Hedge and Franklin Liberty

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

The idea behind IQ Hedge Multi Strategy and Franklin Liberty Systematic 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.