Correlation Between Franklin Federal and Thrivent Municipal
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Thrivent Municipal 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 Thrivent Municipal 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 Thrivent Municipal Bond, you can compare the effects of market volatilities on Franklin Federal and Thrivent Municipal 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 Thrivent Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Thrivent Municipal.
Diversification Opportunities for Franklin Federal and Thrivent Municipal
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and Thrivent is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Tax Free and Thrivent Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Municipal Bond 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 Thrivent Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Municipal Bond has no effect on the direction of Franklin Federal i.e., Franklin Federal and Thrivent Municipal go up and down completely randomly.
Pair Corralation between Franklin Federal and Thrivent Municipal
Assuming the 90 days horizon Franklin Federal Tax Free is expected to generate 0.94 times more return on investment than Thrivent Municipal. However, Franklin Federal Tax Free is 1.07 times less risky than Thrivent Municipal. It trades about 0.08 of its potential returns per unit of risk. Thrivent Municipal Bond is currently generating about 0.07 per unit of risk. If you would invest 991.00 in Franklin Federal Tax Free on September 12, 2024 and sell it today you would earn a total of 110.00 from holding Franklin Federal Tax Free or generate 11.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Franklin Federal Tax Free vs. Thrivent Municipal Bond
Performance |
| Timeline |
| Franklin Federal Tax |
| Thrivent Municipal Bond |
Franklin Federal and Thrivent Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Thrivent Municipal
The main advantage of trading using opposite Franklin Federal and Thrivent Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Thrivent Municipal 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 Thrivent Municipal will offset losses from the drop in Thrivent Municipal's long position.The idea behind Franklin Federal Tax Free and Thrivent Municipal Bond pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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