Correlation Between Franklin Liberty and Fidelity Low

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

By analyzing existing cross correlation between Franklin Liberty Low and Fidelity Low Volatility, you can compare the effects of market volatilities on Franklin Liberty and Fidelity Low 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 Fidelity Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and Fidelity Low.

Diversification Opportunities for Franklin Liberty and Fidelity Low

0.93

Correlation Coefficient

Franklin Liberty  Fidelity Low

Almost no diversification

The 3 months correlation between Franklin and Fidelity is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Low and Fidelity Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Low Volatility 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 Low are associated (or correlated) with Fidelity Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Low Volatility has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Fidelity Low go up and down completely randomly.

Pair Corralation between Franklin Liberty and Fidelity Low

Given the investment horizon of 90 days Franklin Liberty Low is expected to under-perform the Fidelity Low. In addition to that, Franklin Liberty is 1.17 times more volatile than Fidelity Low Volatility. It trades about -0.15 of its total potential returns per unit of risk. Fidelity Low Volatility is currently generating about -0.1 per unit of volatility. If you would invest  5,535  in Fidelity Low Volatility on February 5, 2024 and sell it today you would lose (65.00) from holding Fidelity Low Volatility or give up 1.17% of portfolio value over 90 days.

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

Franklin Liberty Low  vs.  Fidelity Low Volatility

Franklin Liberty Low

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Low are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable essential indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Fidelity Low Volatility

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Franklin Liberty and Fidelity Low

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

The idea behind Franklin Liberty Low and Fidelity Low Volatility 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.