Correlation Between Franklin California and Schwab California
Can any of the company-specific risk be diversified away by investing in both Franklin California and Schwab California 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 California and Schwab California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin California Intermediate Term and Schwab California Tax Free, you can compare the effects of market volatilities on Franklin California and Schwab California 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 California with a short position of Schwab California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin California and Schwab California.
Diversification Opportunities for Franklin California and Schwab California
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and Schwab is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Franklin California Intermedia and Schwab California Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab California Tax and Franklin California 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 California Intermediate Term are associated (or correlated) with Schwab California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab California Tax has no effect on the direction of Franklin California i.e., Franklin California and Schwab California go up and down completely randomly.
Pair Corralation between Franklin California and Schwab California
Assuming the 90 days horizon Franklin California is expected to generate 1.36 times less return on investment than Schwab California. But when comparing it to its historical volatility, Franklin California Intermediate Term is 1.08 times less risky than Schwab California. It trades about 0.16 of its potential returns per unit of risk. Schwab California Tax Free is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,110 in Schwab California Tax Free on September 4, 2024 and sell it today you would earn a total of 11.00 from holding Schwab California Tax Free or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin California Intermedia vs. Schwab California Tax Free
Performance |
| Timeline |
| Franklin California |
| Schwab California Tax |
Franklin California and Schwab California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin California and Schwab California
The main advantage of trading using opposite Franklin California and Schwab California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin California position performs unexpectedly, Schwab California 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 Schwab California will offset losses from the drop in Schwab California's long position.| Franklin California vs. Franklin Mutual Beacon | Franklin California vs. Templeton Developing Markets | Franklin California vs. Franklin Mutual Global | Franklin California vs. Franklin Mutual Global |
| Schwab California vs. Vanguard California Long Term | Schwab California vs. Franklin High Yield | Schwab California vs. California High Yield Municipal | Schwab California vs. Bbh Intermediate Municipal |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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