Correlation Between American High-income and Franklin High
Can any of the company-specific risk be diversified away by investing in both American High-income and Franklin High 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 American High-income and Franklin High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American High Income Municipal and Franklin High Yield, you can compare the effects of market volatilities on American High-income and Franklin High 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 American High-income with a short position of Franklin High. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High-income and Franklin High.
Diversification Opportunities for American High-income and Franklin High
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Franklin is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding American High Income Municipal and Franklin High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin High Yield and American High-income 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 American High Income Municipal are associated (or correlated) with Franklin High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin High Yield has no effect on the direction of American High-income i.e., American High-income and Franklin High go up and down completely randomly.
Pair Corralation between American High-income and Franklin High
Assuming the 90 days horizon American High-income is expected to generate 1.14 times less return on investment than Franklin High. But when comparing it to its historical volatility, American High Income Municipal is 1.09 times less risky than Franklin High. It trades about 0.19 of its potential returns per unit of risk. Franklin High Yield is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 899.00 in Franklin High Yield on September 1, 2024 and sell it today you would earn a total of 14.00 from holding Franklin High Yield or generate 1.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American High Income Municipal vs. Franklin High Yield
Performance |
| Timeline |
| American High Income |
| Franklin High Yield |
American High-income and Franklin High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American High-income and Franklin High
The main advantage of trading using opposite American High-income and Franklin High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American High-income position performs unexpectedly, Franklin High 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 Franklin High will offset losses from the drop in Franklin High's long position.| American High-income vs. Touchstone Small Cap | American High-income vs. Fisher Small Cap | American High-income vs. Jpmorgan Small Cap | American High-income vs. Legg Mason Partners |
| Franklin High vs. Ab Select Longshort | Franklin High vs. Angel Oak Ultrashort | Franklin High vs. Old Westbury Short Term | Franklin High vs. Ultra Short Fixed Income |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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