Correlation Between Franklin Federal and Nuveen All-american
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Nuveen All-american 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 Nuveen All-american 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 Nuveen All American Municipal, you can compare the effects of market volatilities on Franklin Federal and Nuveen All-american 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 Nuveen All-american. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Nuveen All-american.
Diversification Opportunities for Franklin Federal and Nuveen All-american
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Nuveen is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Tax Free and Nuveen All American Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen All American 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 Nuveen All-american. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen All American has no effect on the direction of Franklin Federal i.e., Franklin Federal and Nuveen All-american go up and down completely randomly.
Pair Corralation between Franklin Federal and Nuveen All-american
Assuming the 90 days horizon Franklin Federal Tax Free is expected to generate 1.08 times more return on investment than Nuveen All-american. However, Franklin Federal is 1.08 times more volatile than Nuveen All American Municipal. It trades about 0.22 of its potential returns per unit of risk. Nuveen All American Municipal is currently generating about 0.19 per unit of risk. If you would invest 1,081 in Franklin Federal Tax Free on August 31, 2024 and sell it today you would earn a total of 18.00 from holding Franklin Federal Tax Free or generate 1.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Federal Tax Free vs. Nuveen All American Municipal
Performance |
| Timeline |
| Franklin Federal Tax |
| Nuveen All American |
Franklin Federal and Nuveen All-american Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Nuveen All-american
The main advantage of trading using opposite Franklin Federal and Nuveen All-american positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Nuveen All-american 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 Nuveen All-american will offset losses from the drop in Nuveen All-american's long position.| Franklin Federal vs. Small Cap Stock | Franklin Federal vs. The Gabelli Small | Franklin Federal vs. Blackrock Sm Cap | Franklin Federal vs. Harbor Diversified International |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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