Correlation Between Franklin Federal and Fidelity Municipal
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Fidelity 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 Fidelity 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 Fidelity Municipal Income, you can compare the effects of market volatilities on Franklin Federal and Fidelity 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 Fidelity Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Fidelity Municipal.
Diversification Opportunities for Franklin Federal and Fidelity Municipal
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and Fidelity is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Tax Free and Fidelity Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Municipal Income 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 Fidelity Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Municipal Income has no effect on the direction of Franklin Federal i.e., Franklin Federal and Fidelity Municipal go up and down completely randomly.
Pair Corralation between Franklin Federal and Fidelity Municipal
Assuming the 90 days horizon Franklin Federal Tax Free is expected to generate 1.05 times more return on investment than Fidelity Municipal. However, Franklin Federal is 1.05 times more volatile than Fidelity Municipal Income. It trades about 0.12 of its potential returns per unit of risk. Fidelity Municipal Income is currently generating about 0.09 per unit of risk. If you would invest 1,032 in Franklin Federal Tax Free on September 4, 2024 and sell it today you would earn a total of 69.00 from holding Franklin Federal Tax Free or generate 6.69% 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. Fidelity Municipal Income
Performance |
| Timeline |
| Franklin Federal Tax |
| Fidelity Municipal Income |
Franklin Federal and Fidelity Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Fidelity Municipal
The main advantage of trading using opposite Franklin Federal and Fidelity Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Fidelity 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 Fidelity Municipal will offset losses from the drop in Fidelity Municipal's long position.| Franklin Federal vs. Rbb Fund | Franklin Federal vs. T Rowe Price | Franklin Federal vs. Touchstone Large Cap | Franklin Federal vs. Old Westbury Large |
| Fidelity Municipal vs. Fidelity New Markets | Fidelity Municipal vs. Fidelity New Markets | Fidelity Municipal vs. Fidelity Advisor Sustainable | Fidelity Municipal vs. Fidelity New 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges |