Correlation Between Limited Duration and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Limited Duration and Franklin Federal 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 Limited Duration and Franklin Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Limited Duration Fund and Franklin Federal Limited Term, you can compare the effects of market volatilities on Limited Duration and Franklin Federal 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 Limited Duration with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Limited Duration and Franklin Federal.
Diversification Opportunities for Limited Duration and Franklin Federal
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Limited and Franklin is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Limited Duration Fund and Franklin Federal Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Federal Lim and Limited Duration 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 Limited Duration Fund are associated (or correlated) with Franklin Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Federal Lim has no effect on the direction of Limited Duration i.e., Limited Duration and Franklin Federal go up and down completely randomly.
Pair Corralation between Limited Duration and Franklin Federal
Assuming the 90 days horizon Limited Duration Fund is expected to generate 1.64 times more return on investment than Franklin Federal. However, Limited Duration is 1.64 times more volatile than Franklin Federal Limited Term. It trades about 0.12 of its potential returns per unit of risk. Franklin Federal Limited Term is currently generating about 0.15 per unit of risk. If you would invest 838.00 in Limited Duration Fund on September 12, 2024 and sell it today you would earn a total of 91.00 from holding Limited Duration Fund or generate 10.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Limited Duration Fund vs. Franklin Federal Limited Term
Performance |
| Timeline |
| Limited Duration |
| Franklin Federal Lim |
Limited Duration and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Limited Duration and Franklin Federal
The main advantage of trading using opposite Limited Duration and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Limited Duration position performs unexpectedly, Franklin Federal 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 Federal will offset losses from the drop in Franklin Federal's long position.| Limited Duration vs. Franklin Federal Limited Term | Limited Duration vs. Blackrock Short Term Inflat Protected | Limited Duration vs. Dreyfus Short Intermediate | Limited Duration vs. Lord Abbett Short |
| Franklin Federal vs. Vanguard Limited Term Tax Exempt | Franklin Federal vs. SCOR PK | Franklin Federal vs. Morningstar Unconstrained Allocation | Franklin Federal vs. Via Renewables |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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