Correlation Between Franklin FTSE and IShares India

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

By analyzing existing cross correlation between Franklin FTSE India and iShares India 50, you can compare the effects of market volatilities on Franklin FTSE and IShares India 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 IShares India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin FTSE and IShares India.

Diversification Opportunities for Franklin FTSE and IShares India

0.97

Correlation Coefficient

Franklin FTSE  IShares India

Almost no diversification

The 3 months correlation between Franklin and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Franklin FTSE India and iShares India 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares India 50 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 India are associated (or correlated) with IShares India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares India 50 has no effect on the direction of Franklin FTSE i.e., Franklin FTSE and IShares India go up and down completely randomly.

Pair Corralation between Franklin FTSE and IShares India

Given the investment horizon of 90 days Franklin FTSE India is expected to generate 1.1 times more return on investment than IShares India. However, Franklin FTSE is 1.1 times more volatile than iShares India 50. It trades about 0.14 of its potential returns per unit of risk. iShares India 50 is currently generating about 0.15 per unit of risk. If you would invest  3,948  in Franklin FTSE India on June 22, 2024 and sell it today you would earn a total of  277.00  from holding Franklin FTSE India or generate 7.02% return on investment over 90 days.

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

Franklin FTSE India  vs.  iShares India 50

Franklin FTSE India

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin FTSE India are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Franklin FTSE may actually be approaching a critical reversion point that can send shares even higher in October 2024.

iShares India 50

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares India 50 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, IShares India may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with Franklin FTSE and IShares India

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

The idea behind Franklin FTSE India and iShares India 50 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.