Correlation Between IShares AsiaPacific and Franklin Templeton

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Can any of the company-specific risk be diversified away by investing in both IShares AsiaPacific 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 IShares AsiaPacific and Franklin Templeton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IShares AsiaPacific Dividend and Franklin Templeton ETF, you can compare the effects of market volatilities on IShares AsiaPacific 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 IShares AsiaPacific with a short position of Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares AsiaPacific and Franklin Templeton.

Diversification Opportunities for IShares AsiaPacific and Franklin Templeton

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between IShares and Franklin is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding IShares AsiaPacific Dividend 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 IShares AsiaPacific 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 AsiaPacific Dividend 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 IShares AsiaPacific i.e., IShares AsiaPacific and Franklin Templeton go up and down completely randomly.

Pair Corralation between IShares AsiaPacific and Franklin Templeton

Given the investment horizon of 90 days IShares AsiaPacific is expected to generate 1.83 times less return on investment than Franklin Templeton. In addition to that, IShares AsiaPacific is 1.01 times more volatile than Franklin Templeton ETF. It trades about 0.07 of its total potential returns per unit of risk. Franklin Templeton ETF is currently generating about 0.12 per unit of volatility. If you would invest  2,444  in Franklin Templeton ETF on November 30, 2023 and sell it today you would earn a total of  54.00  from holding Franklin Templeton ETF or generate 2.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

IShares AsiaPacific Dividend  vs.  Franklin Templeton ETF

 Performance 
       Timeline  
IShares AsiaPacific 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in IShares AsiaPacific Dividend are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, IShares AsiaPacific may actually be approaching a critical reversion point that can send shares even higher in March 2024.
Franklin Templeton ETF 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Templeton ETF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Franklin Templeton may actually be approaching a critical reversion point that can send shares even higher in March 2024.

IShares AsiaPacific and Franklin Templeton Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares AsiaPacific and Franklin Templeton

The main advantage of trading using opposite IShares AsiaPacific and Franklin Templeton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares AsiaPacific 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 IShares AsiaPacific Dividend 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.
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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