Correlation Between Franklin Federal and Ishares Municipal
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Ishares Municipal 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 Federal and Ishares Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Federal Tax Free and Ishares Municipal Bond, you can compare the effects of market volatilities on Franklin Federal and Ishares Municipal 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 Federal with a short position of Ishares Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Ishares Municipal.
Diversification Opportunities for Franklin Federal and Ishares Municipal
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and Ishares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Tax Free and Ishares Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares Municipal Bond and Franklin Federal 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 Federal Tax Free are associated (or correlated) with Ishares Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares Municipal Bond has no effect on the direction of Franklin Federal i.e., Franklin Federal and Ishares Municipal go up and down completely randomly.
Pair Corralation between Franklin Federal and Ishares Municipal
Assuming the 90 days horizon Franklin Federal Tax Free is expected to generate 1.09 times more return on investment than Ishares Municipal. However, Franklin Federal is 1.09 times more volatile than Ishares Municipal Bond. It trades about 0.08 of its potential returns per unit of risk. Ishares Municipal Bond is currently generating about 0.07 per unit of risk. If you would invest 997.00 in Franklin Federal Tax Free on September 3, 2024 and sell it today you would earn a total of 105.00 from holding Franklin Federal Tax Free or generate 10.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Federal Tax Free vs. Ishares Municipal Bond
Performance |
| Timeline |
| Franklin Federal Tax |
| Ishares Municipal Bond |
Franklin Federal and Ishares Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Ishares Municipal
The main advantage of trading using opposite Franklin Federal and Ishares Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Ishares Municipal 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 Ishares Municipal will offset losses from the drop in Ishares Municipal's long position.| Franklin Federal vs. Goldman Sachs Financial | Franklin Federal vs. Fidelity Advisor Financial | Franklin Federal vs. Royce Global Financial | Franklin Federal vs. Transamerica Financial Life |
| Ishares Municipal vs. Vanguard Long Term Tax Exempt | Ishares Municipal vs. Vanguard High Yield Tax Exempt | Ishares Municipal vs. Franklin Federal Tax Free | Ishares Municipal vs. Franklin Federal Tax Free |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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