Correlation Between Ishares Municipal and Franklin Convertible
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Franklin Convertible 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 Ishares Municipal and Franklin Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ishares Municipal Bond and Franklin Vertible Securities, you can compare the effects of market volatilities on Ishares Municipal and Franklin Convertible 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 Ishares Municipal with a short position of Franklin Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Franklin Convertible.
Diversification Opportunities for Ishares Municipal and Franklin Convertible
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ishares and Franklin is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Franklin Vertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Convertible and Ishares Municipal 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 Ishares Municipal Bond are associated (or correlated) with Franklin Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Convertible has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Franklin Convertible go up and down completely randomly.
Pair Corralation between Ishares Municipal and Franklin Convertible
Assuming the 90 days horizon Ishares Municipal Bond is expected to generate 0.34 times more return on investment than Franklin Convertible. However, Ishares Municipal Bond is 2.91 times less risky than Franklin Convertible. It trades about 0.17 of its potential returns per unit of risk. Franklin Vertible Securities is currently generating about -0.2 per unit of risk. If you would invest 1,099 in Ishares Municipal Bond on December 4, 2024 and sell it today you would earn a total of 8.00 from holding Ishares Municipal Bond or generate 0.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ishares Municipal Bond vs. Franklin Vertible Securities
Performance |
| Timeline |
| Ishares Municipal Bond |
| Franklin Convertible |
Ishares Municipal and Franklin Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Franklin Convertible
The main advantage of trading using opposite Ishares Municipal and Franklin Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Franklin Convertible 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 Convertible will offset losses from the drop in Franklin Convertible's long position.| Ishares Municipal vs. T Rowe Price | Ishares Municipal vs. T Rowe Price | Ishares Municipal vs. Nuveen Nwq Small Cap | Ishares Municipal vs. Channing Intrinsic Value |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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