Correlation Between Fidelity California and Franklin California
Can any of the company-specific risk be diversified away by investing in both Fidelity California and Franklin California 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 Fidelity California and Franklin California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity California Municipal and Franklin California Tax Free, you can compare the effects of market volatilities on Fidelity California and Franklin California 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 Fidelity California with a short position of Franklin California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity California and Franklin California.
Diversification Opportunities for Fidelity California and Franklin California
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Fidelity and Franklin is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity California Municipal and Franklin California Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin California Tax and Fidelity 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 Fidelity California Municipal are associated (or correlated) with Franklin California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin California Tax has no effect on the direction of Fidelity California i.e., Fidelity California and Franklin California go up and down completely randomly.
Pair Corralation between Fidelity California and Franklin California
Assuming the 90 days horizon Fidelity California is expected to generate 1.12 times less return on investment than Franklin California. But when comparing it to its historical volatility, Fidelity California Municipal is 1.1 times less risky than Franklin California. It trades about 0.1 of its potential returns per unit of risk. Franklin California Tax Free is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 655.00 in Franklin California Tax Free on September 2, 2024 and sell it today you would earn a total of 38.00 from holding Franklin California Tax Free or generate 5.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity California Municipal vs. Franklin California Tax Free
Performance |
| Timeline |
| Fidelity California |
| Franklin California Tax |
Fidelity California and Franklin California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity California and Franklin California
The main advantage of trading using opposite Fidelity California and Franklin California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity California position performs unexpectedly, Franklin California 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 California will offset losses from the drop in Franklin California's long position.| Fidelity California vs. Fidelity California Limited | Fidelity California vs. Fidelity Municipal Income | Fidelity California vs. Fidelity Tax Free Bond | Fidelity California vs. Fidelity Limited Term |
| Franklin California vs. Franklin Mutual Beacon | Franklin California vs. Templeton Developing Markets | Franklin California vs. Franklin Mutual Global | Franklin California vs. Franklin Mutual Global |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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