Correlation Between Franklin Liberty and WisdomTree Floating

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

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

Diversification Opportunities for Franklin Liberty and WisdomTree Floating

0.95

Correlation Coefficient

Franklin Liberty  WisdomTree Floating

Almost no diversification

The 3 months correlation between Franklin and WisdomTree is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Ultra and WisdomTree Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Floating Rate and Franklin Liberty 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 Liberty Ultra are associated (or correlated) with WisdomTree Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Floating Rate has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and WisdomTree Floating go up and down completely randomly.

Pair Corralation between Franklin Liberty and WisdomTree Floating

Given the investment horizon of 90 days Franklin Liberty Ultra is expected to generate 0.66 times more return on investment than WisdomTree Floating. However, Franklin Liberty Ultra is 1.51 times less risky than WisdomTree Floating. It trades about 0.21 of its potential returns per unit of risk. WisdomTree Floating Rate is currently generating about 0.14 per unit of risk. If you would invest  2,451  in Franklin Liberty Ultra on March 14, 2024 and sell it today you would earn a total of  34.00  from holding Franklin Liberty Ultra or generate 1.39% return on investment over 90 days.

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

Franklin Liberty Ultra  vs.  WisdomTree Floating Rate

Franklin Liberty Ultra

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Ultra are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

WisdomTree Floating Rate

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Floating Rate are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, WisdomTree Floating is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Franklin Liberty and WisdomTree Floating

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

The idea behind Franklin Liberty Ultra and WisdomTree Floating Rate 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..