Correlation Between Franklin Federal and Municipal Bond
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Municipal 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 Federal and Municipal Bond 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 Municipal Bond Fund, you can compare the effects of market volatilities on Franklin Federal and Municipal 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 Federal with a short position of Municipal Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Municipal Bond.
Diversification Opportunities for Franklin Federal and Municipal Bond
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Municipal is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Tax Free and Municipal Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 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 Municipal Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Municipal Bond has no effect on the direction of Franklin Federal i.e., Franklin Federal and Municipal Bond go up and down completely randomly.
Pair Corralation between Franklin Federal and Municipal Bond
Assuming the 90 days horizon Franklin Federal Tax Free is expected to generate 1.27 times more return on investment than Municipal Bond. However, Franklin Federal is 1.27 times more volatile than Municipal Bond Fund. It trades about 0.07 of its potential returns per unit of risk. Municipal Bond Fund is currently generating about 0.08 per unit of risk. If you would invest 1,001 in Franklin Federal Tax Free on September 4, 2024 and sell it today you would earn a total of 100.00 from holding Franklin Federal Tax Free or generate 9.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Franklin Federal Tax Free vs. Municipal Bond Fund
Performance |
| Timeline |
| Franklin Federal Tax |
| Municipal Bond |
Franklin Federal and Municipal Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Municipal Bond
The main advantage of trading using opposite Franklin Federal and Municipal Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Municipal 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 Municipal Bond will offset losses from the drop in Municipal Bond'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 |
| Municipal Bond vs. Harbor Diversified International | Municipal Bond vs. Legg Mason Bw | Municipal Bond vs. Jhancock Diversified Macro | Municipal Bond vs. Blackrock Sm Cap |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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