Correlation Between Amplify CWP and Franklin Templeton

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

By analyzing existing cross correlation between Amplify CWP Enhanced and Franklin Templeton ETF, you can compare the effects of market volatilities on Amplify CWP and Franklin Templeton 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 Amplify CWP with a short position of Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amplify CWP and Franklin Templeton.

Diversification Opportunities for Amplify CWP and Franklin Templeton

Very poor diversification

The 3 months correlation between Amplify and Franklin is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Amplify CWP Enhanced and Franklin Templeton ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton ETF and Amplify CWP 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 Amplify CWP Enhanced are associated (or correlated) with Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton ETF has no effect on the direction of Amplify CWP i.e., Amplify CWP and Franklin Templeton go up and down completely randomly.

Pair Corralation between Amplify CWP and Franklin Templeton

Given the investment horizon of 90 days Amplify CWP is expected to generate 1.72 times less return on investment than Franklin Templeton. But when comparing it to its historical volatility, Amplify CWP Enhanced is 1.65 times less risky than Franklin Templeton. It trades about 0.1 of its potential returns per unit of risk. Franklin Templeton ETF is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,278  in Franklin Templeton ETF on September 9, 2023 and sell it today you would earn a total of  89.00  from holding Franklin Templeton ETF or generate 3.91% return on investment over 90 days.

Amplify CWP Enhanced  vs.  Franklin Templeton ETF

Amplify CWP Enhanced

Amplify Performance

0 of 100

Over the last 90 days Amplify CWP Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Amplify CWP is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the insiders.

Franklin Templeton ETF

Franklin Performance

2 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Templeton ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Franklin Templeton is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the insiders.

Pair Trading with Amplify CWP and Franklin Templeton

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

The idea behind Amplify CWP Enhanced and Franklin Templeton ETF 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.