Correlation Between Franklin Emerging and California Bond
Can any of the company-specific risk be diversified away by investing in both Franklin Emerging and California Bond 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 Emerging and California Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Emerging Market and California Bond Fund, you can compare the effects of market volatilities on Franklin Emerging and California Bond 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 Emerging with a short position of California Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Emerging and California Bond.
Diversification Opportunities for Franklin Emerging and California Bond
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Franklin and California is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Emerging Market and California Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Bond and Franklin Emerging 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 Emerging Market are associated (or correlated) with California Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Bond has no effect on the direction of Franklin Emerging i.e., Franklin Emerging and California Bond go up and down completely randomly.
Pair Corralation between Franklin Emerging and California Bond
Assuming the 90 days horizon Franklin Emerging Market is expected to generate 1.12 times more return on investment than California Bond. However, Franklin Emerging is 1.12 times more volatile than California Bond Fund. It trades about 0.18 of its potential returns per unit of risk. California Bond Fund is currently generating about 0.06 per unit of risk. If you would invest 930.00 in Franklin Emerging Market on August 27, 2024 and sell it today you would earn a total of 283.00 from holding Franklin Emerging Market or generate 30.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Emerging Market vs. California Bond Fund
Performance |
| Timeline |
| Franklin Emerging Market |
| California Bond |
Franklin Emerging and California Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Emerging and California Bond
The main advantage of trading using opposite Franklin Emerging and California Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Emerging position performs unexpectedly, California Bond 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 California Bond will offset losses from the drop in California Bond's long position.| Franklin Emerging vs. Chartwell Short Duration | Franklin Emerging vs. Ultra Short Term Fixed | Franklin Emerging vs. Maryland Tax Free Bond | Franklin Emerging vs. Bbh Intermediate Municipal |
| California Bond vs. Nuveen Minnesota Municipal | California Bond vs. Morningstar Defensive Bond | California Bond vs. Intermediate Term Bond Fund | California Bond vs. Ishares Municipal Bond |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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