Correlation Between Franklin Federal and Thornburg Limited
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Thornburg Limited 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 Thornburg Limited 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 Thornburg Limited Term, you can compare the effects of market volatilities on Franklin Federal and Thornburg Limited 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 Thornburg Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Thornburg Limited.
Diversification Opportunities for Franklin Federal and Thornburg Limited
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Thornburg is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Tax Free and Thornburg Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Limited Term 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 Thornburg Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Limited Term has no effect on the direction of Franklin Federal i.e., Franklin Federal and Thornburg Limited go up and down completely randomly.
Pair Corralation between Franklin Federal and Thornburg Limited
Assuming the 90 days horizon Franklin Federal Tax Free is expected to generate 1.84 times more return on investment than Thornburg Limited. However, Franklin Federal is 1.84 times more volatile than Thornburg Limited Term. It trades about 0.06 of its potential returns per unit of risk. Thornburg Limited Term is currently generating about 0.08 per unit of risk. If you would invest 1,046 in Franklin Federal Tax Free on November 4, 2024 and sell it today you would earn a total of 35.00 from holding Franklin Federal Tax Free or generate 3.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Federal Tax Free vs. Thornburg Limited Term
Performance |
| Timeline |
| Franklin Federal Tax |
| Thornburg Limited Term |
Franklin Federal and Thornburg Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Thornburg Limited
The main advantage of trading using opposite Franklin Federal and Thornburg Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Thornburg Limited 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 Thornburg Limited will offset losses from the drop in Thornburg Limited's long position.| Franklin Federal vs. Fidelity Advisor Financial | Franklin Federal vs. Icon Financial Fund | Franklin Federal vs. Financial Industries Fund | Franklin Federal vs. Vanguard Financials Index |
| Thornburg Limited vs. Thornburg Value Fund | Thornburg Limited vs. Thornburg Value Fund | Thornburg Limited vs. Thornburg International Value | Thornburg Limited vs. Thornburg International 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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