Correlation Between Franklin High and Federated Ultrashort
Can any of the company-specific risk be diversified away by investing in both Franklin High and Federated Ultrashort 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 High and Federated Ultrashort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin High Yield and Federated Ultrashort Bond, you can compare the effects of market volatilities on Franklin High and Federated Ultrashort 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 High with a short position of Federated Ultrashort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin High and Federated Ultrashort.
Diversification Opportunities for Franklin High and Federated Ultrashort
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Franklin and Federated is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Yield and Federated Ultrashort Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Ultrashort Bond and Franklin High 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 High Yield are associated (or correlated) with Federated Ultrashort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Ultrashort Bond has no effect on the direction of Franklin High i.e., Franklin High and Federated Ultrashort go up and down completely randomly.
Pair Corralation between Franklin High and Federated Ultrashort
Assuming the 90 days horizon Franklin High Yield is expected to generate 2.49 times more return on investment than Federated Ultrashort. However, Franklin High is 2.49 times more volatile than Federated Ultrashort Bond. It trades about 0.12 of its potential returns per unit of risk. Federated Ultrashort Bond is currently generating about 0.23 per unit of risk. If you would invest 884.00 in Franklin High Yield on September 12, 2024 and sell it today you would earn a total of 33.00 from holding Franklin High Yield or generate 3.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin High Yield vs. Federated Ultrashort Bond
Performance |
| Timeline |
| Franklin High Yield |
| Federated Ultrashort Bond |
Franklin High and Federated Ultrashort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin High and Federated Ultrashort
The main advantage of trading using opposite Franklin High and Federated Ultrashort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin High position performs unexpectedly, Federated Ultrashort 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 Federated Ultrashort will offset losses from the drop in Federated Ultrashort's long position.| Franklin High vs. Cref Money Market | Franklin High vs. Chestnut Street Exchange | Franklin High vs. Aig Government Money | Franklin High vs. Matson Money Equity |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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