Correlation Between Franklin Adjustable and Arbitrage Fund
Can any of the company-specific risk be diversified away by investing in both Franklin Adjustable and Arbitrage Fund 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 Adjustable and Arbitrage Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Adjustable Government and The Arbitrage Fund, you can compare the effects of market volatilities on Franklin Adjustable and Arbitrage Fund 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 Adjustable with a short position of Arbitrage Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Adjustable and Arbitrage Fund.
Diversification Opportunities for Franklin Adjustable and Arbitrage Fund
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Franklin and Arbitrage is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Adjustable Government and The Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Fund and Franklin Adjustable 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 Adjustable Government are associated (or correlated) with Arbitrage Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrage Fund has no effect on the direction of Franklin Adjustable i.e., Franklin Adjustable and Arbitrage Fund go up and down completely randomly.
Pair Corralation between Franklin Adjustable and Arbitrage Fund
Assuming the 90 days horizon Franklin Adjustable Government is not expected to generate positive returns. However, Franklin Adjustable Government is 3.24 times less risky than Arbitrage Fund. It waists most of its returns potential to compensate for thr risk taken. Arbitrage Fund is generating about 0.09 per unit of risk. If you would invest 1,347 in The Arbitrage Fund on September 19, 2024 and sell it today you would earn a total of 5.00 from holding The Arbitrage Fund or generate 0.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Adjustable Government vs. The Arbitrage Fund
Performance |
| Timeline |
| Franklin Adjustable |
| Arbitrage Fund |
Franklin Adjustable and Arbitrage Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Adjustable and Arbitrage Fund
The main advantage of trading using opposite Franklin Adjustable and Arbitrage Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Adjustable position performs unexpectedly, Arbitrage Fund 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 Arbitrage Fund will offset losses from the drop in Arbitrage Fund's long position.The idea behind Franklin Adjustable Government and The Arbitrage Fund 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.
| Arbitrage Fund vs. Us Government Securities | Arbitrage Fund vs. Dreyfus Government Cash | Arbitrage Fund vs. Wesmark Government Bond | Arbitrage Fund vs. Franklin Adjustable Government |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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