Correlation Between FRANKLIN LIFESMART and Coca Cola

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Can any of the company-specific risk be diversified away by investing in both FRANKLIN LIFESMART and Coca Cola 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 LIFESMART and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FRANKLIN LIFESMART 2045 and Coca-Cola Co, you can compare the effects of market volatilities on FRANKLIN LIFESMART and Coca Cola 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 LIFESMART with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of FRANKLIN LIFESMART and Coca Cola.

Diversification Opportunities for FRANKLIN LIFESMART and Coca Cola

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between FRANKLIN and Coca Cola is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding FRANKLIN LIFESMART 2045 and Coca-Cola Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca-Cola and FRANKLIN LIFESMART 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 LIFESMART 2045 are associated (or correlated) with Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca-Cola has no effect on the direction of FRANKLIN LIFESMART i.e., FRANKLIN LIFESMART and Coca Cola go up and down completely randomly.

Pair Corralation between FRANKLIN LIFESMART and Coca Cola

Assuming the 90 days horizon FRANKLIN LIFESMART is expected to generate 13.71 times less return on investment than Coca Cola. But when comparing it to its historical volatility, FRANKLIN LIFESMART 2045 is 1.06 times less risky than Coca Cola. It trades about 0.0 of its potential returns per unit of risk. Coca-Cola Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,060  in Coca-Cola Co on September 9, 2022 and sell it today you would earn a total of  1,294  from holding Coca-Cola Co or generate 25.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

FRANKLIN LIFESMART 2045  vs.  Coca-Cola Co

 Performance (%) 
       Timeline  
FRANKLIN LIFESMART 2045 
FRANKLIN Performance
0 of 100
Over the last 90 days FRANKLIN LIFESMART 2045 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, FRANKLIN LIFESMART is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FRANKLIN Price Channel

Coca-Cola 
Coca Cola Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Coca-Cola Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Coca Cola is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Coca Cola Price Channel

FRANKLIN LIFESMART and Coca Cola Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FRANKLIN LIFESMART and Coca Cola

The main advantage of trading using opposite FRANKLIN LIFESMART and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FRANKLIN LIFESMART position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.
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The idea behind FRANKLIN LIFESMART 2045 and Coca-Cola Co 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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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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