Correlation Between Franklin Federal and Victory Tax-exempt
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Victory Tax-exempt 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 Victory Tax-exempt 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 Victory Tax Exempt Fund, you can compare the effects of market volatilities on Franklin Federal and Victory Tax-exempt 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 Victory Tax-exempt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Victory Tax-exempt.
Diversification Opportunities for Franklin Federal and Victory Tax-exempt
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and Victory is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Tax Free and Victory Tax Exempt Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Tax Exempt 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 Victory Tax-exempt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Tax Exempt has no effect on the direction of Franklin Federal i.e., Franklin Federal and Victory Tax-exempt go up and down completely randomly.
Pair Corralation between Franklin Federal and Victory Tax-exempt
Assuming the 90 days horizon Franklin Federal is expected to generate 1.04 times less return on investment than Victory Tax-exempt. But when comparing it to its historical volatility, Franklin Federal Tax Free is 1.24 times less risky than Victory Tax-exempt. It trades about 0.18 of its potential returns per unit of risk. Victory Tax Exempt Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 766.00 in Victory Tax Exempt Fund on September 1, 2024 and sell it today you would earn a total of 99.00 from holding Victory Tax Exempt Fund or generate 12.92% 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. Victory Tax Exempt Fund
Performance |
| Timeline |
| Franklin Federal Tax |
| Victory Tax Exempt |
Franklin Federal and Victory Tax-exempt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Victory Tax-exempt
The main advantage of trading using opposite Franklin Federal and Victory Tax-exempt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Victory Tax-exempt 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 Victory Tax-exempt will offset losses from the drop in Victory Tax-exempt's long position.| Franklin Federal vs. Icon Financial Fund | Franklin Federal vs. Fidelity Advisor Financial | Franklin Federal vs. Prudential Jennison Financial | Franklin Federal vs. Davis Financial Fund |
| Victory Tax-exempt vs. Victory Rs International | Victory Tax-exempt vs. Victory High Yield | Victory Tax-exempt vs. Victory Sycamore Established | Victory Tax-exempt vs. Victory Integrity Discovery |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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