Correlation Between Fidelity Minnesota and Franklin Minnesota
Can any of the company-specific risk be diversified away by investing in both Fidelity Minnesota and Franklin Minnesota 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 Fidelity Minnesota and Franklin Minnesota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Minnesota Municipal and Franklin Minnesota Tax Free, you can compare the effects of market volatilities on Fidelity Minnesota and Franklin Minnesota 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 Fidelity Minnesota with a short position of Franklin Minnesota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Minnesota and Franklin Minnesota.
Diversification Opportunities for Fidelity Minnesota and Franklin Minnesota
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fidelity and Franklin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Minnesota Municipal and Franklin Minnesota Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Minnesota Tax and Fidelity Minnesota 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 Fidelity Minnesota Municipal are associated (or correlated) with Franklin Minnesota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Minnesota Tax has no effect on the direction of Fidelity Minnesota i.e., Fidelity Minnesota and Franklin Minnesota go up and down completely randomly.
Pair Corralation between Fidelity Minnesota and Franklin Minnesota
Assuming the 90 days horizon Fidelity Minnesota is expected to generate 1.15 times less return on investment than Franklin Minnesota. But when comparing it to its historical volatility, Fidelity Minnesota Municipal is 1.36 times less risky than Franklin Minnesota. It trades about 0.07 of its potential returns per unit of risk. Franklin Minnesota Tax Free is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,055 in Franklin Minnesota Tax Free on September 4, 2024 and sell it today you would earn a total of 84.00 from holding Franklin Minnesota Tax Free or generate 7.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Minnesota Municipal vs. Franklin Minnesota Tax Free
Performance |
| Timeline |
| Fidelity Minnesota |
| Franklin Minnesota Tax |
Fidelity Minnesota and Franklin Minnesota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Minnesota and Franklin Minnesota
The main advantage of trading using opposite Fidelity Minnesota and Franklin Minnesota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Minnesota position performs unexpectedly, Franklin Minnesota 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 Franklin Minnesota will offset losses from the drop in Franklin Minnesota's long position.The idea behind Fidelity Minnesota Municipal and Franklin Minnesota Tax Free 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.
| Franklin Minnesota vs. Franklin Mutual Beacon | Franklin Minnesota vs. Templeton Developing Markets | Franklin Minnesota vs. Franklin Mutual Global | Franklin Minnesota vs. Franklin Mutual Global |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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