Correlation Between Franklin Federal and Fidelity Municipal
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Fidelity 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 Fidelity 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 Fidelity Municipal Income, you can compare the effects of market volatilities on Franklin Federal and Fidelity 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 Fidelity Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Fidelity Municipal.
Diversification Opportunities for Franklin Federal and Fidelity Municipal
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and Fidelity is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Tax Free and Fidelity Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Municipal Income 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 Fidelity Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Municipal Income has no effect on the direction of Franklin Federal i.e., Franklin Federal and Fidelity Municipal go up and down completely randomly.
Pair Corralation between Franklin Federal and Fidelity Municipal
Assuming the 90 days horizon Franklin Federal is expected to generate 1.04 times less return on investment than Fidelity Municipal. In addition to that, Franklin Federal is 1.07 times more volatile than Fidelity Municipal Income. It trades about 0.17 of its total potential returns per unit of risk. Fidelity Municipal Income is currently generating about 0.19 per unit of volatility. If you would invest 1,225 in Fidelity Municipal Income on September 3, 2024 and sell it today you would earn a total of 14.00 from holding Fidelity Municipal Income or generate 1.14% 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. Fidelity Municipal Income
Performance |
| Timeline |
| Franklin Federal Tax |
| Fidelity Municipal Income |
Franklin Federal and Fidelity Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Fidelity Municipal
The main advantage of trading using opposite Franklin Federal and Fidelity Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Fidelity 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 Fidelity Municipal will offset losses from the drop in Fidelity 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 |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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