Correlation Between Franklin FTSE and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both Franklin FTSE and WisdomTree Europe 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 Franklin FTSE and WisdomTree Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin FTSE United and WisdomTree Europe SmallCap, you can compare the effects of market volatilities on Franklin FTSE and WisdomTree Europe 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 Franklin FTSE with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin FTSE and WisdomTree Europe.
Diversification Opportunities for Franklin FTSE and WisdomTree Europe
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and WisdomTree is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Franklin FTSE United and WisdomTree Europe SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe and Franklin 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 Franklin FTSE United are associated (or correlated) with WisdomTree Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Europe has no effect on the direction of Franklin FTSE i.e., Franklin FTSE and WisdomTree Europe go up and down completely randomly.
Pair Corralation between Franklin FTSE and WisdomTree Europe
Given the investment horizon of 90 days Franklin FTSE United is expected to under-perform the WisdomTree Europe. In addition to that, Franklin FTSE is 1.09 times more volatile than WisdomTree Europe SmallCap. It trades about -0.32 of its total potential returns per unit of risk. WisdomTree Europe SmallCap is currently generating about -0.31 per unit of volatility. If you would invest 6,333 in WisdomTree Europe SmallCap on March 18, 2024 and sell it today you would lose (574.00) from holding WisdomTree Europe SmallCap or give up 9.06% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Franklin FTSE United vs. WisdomTree Europe SmallCap
Performance |
Timeline |
Franklin FTSE United |
WisdomTree Europe |
Franklin FTSE and WisdomTree Europe Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Franklin FTSE and WisdomTree Europe
The main advantage of trading using opposite Franklin FTSE and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin FTSE position performs unexpectedly, WisdomTree Europe 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 WisdomTree Europe will offset losses from the drop in WisdomTree Europe's long position.Franklin FTSE vs. HUMANA INC | Franklin FTSE vs. Aquagold International | Franklin FTSE vs. Morningstar Unconstrained Allocation | Franklin FTSE vs. Thrivent High Yield |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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