Correlation Between Franklin California and Franklin Arizona
Can any of the company-specific risk be diversified away by investing in both Franklin California and Franklin Arizona 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 California and Franklin Arizona into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin California Tax Free and Franklin Arizona Tax Free, you can compare the effects of market volatilities on Franklin California and Franklin Arizona 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 California with a short position of Franklin Arizona. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin California and Franklin Arizona.
Diversification Opportunities for Franklin California and Franklin Arizona
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and Franklin is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Franklin California Tax Free and Franklin Arizona Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Arizona Tax and Franklin California 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 California Tax Free are associated (or correlated) with Franklin Arizona. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Arizona Tax has no effect on the direction of Franklin California i.e., Franklin California and Franklin Arizona go up and down completely randomly.
Pair Corralation between Franklin California and Franklin Arizona
Assuming the 90 days horizon Franklin California is expected to generate 1.05 times less return on investment than Franklin Arizona. In addition to that, Franklin California is 1.07 times more volatile than Franklin Arizona Tax Free. It trades about 0.06 of its total potential returns per unit of risk. Franklin Arizona Tax Free is currently generating about 0.07 per unit of volatility. If you would invest 901.00 in Franklin Arizona Tax Free on November 27, 2024 and sell it today you would earn a total of 84.00 from holding Franklin Arizona Tax Free or generate 9.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin California Tax Free vs. Franklin Arizona Tax Free
Performance |
| Timeline |
| Franklin California Tax |
| Franklin Arizona Tax |
Franklin California and Franklin Arizona Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin California and Franklin Arizona
The main advantage of trading using opposite Franklin California and Franklin Arizona positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin California position performs unexpectedly, Franklin Arizona 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 Arizona will offset losses from the drop in Franklin Arizona's long position.| Franklin California vs. Cmg Ultra Short | Franklin California vs. Seix Govt Sec | Franklin California vs. Delaware Investments Ultrashort | Franklin California vs. Blackrock Global Longshort |
| Franklin Arizona vs. Davis Series | Franklin Arizona vs. Transamerica Funds | Franklin Arizona vs. Hsbc Funds | Franklin Arizona vs. Doubleline Emerging Markets |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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