Correlation Between Franklin California and Precious Metals
Can any of the company-specific risk be diversified away by investing in both Franklin California and Precious Metals 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 Precious Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin California Tax Free and Precious Metals Fund, you can compare the effects of market volatilities on Franklin California and Precious Metals 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 Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin California and Precious Metals.
Diversification Opportunities for Franklin California and Precious Metals
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Franklin and PRECIOUS is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Franklin California Tax Free and Precious Metals Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals 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 Tax Free are associated (or correlated) with Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals has no effect on the direction of Franklin California i.e., Franklin California and Precious Metals go up and down completely randomly.
Pair Corralation between Franklin California and Precious Metals
Assuming the 90 days horizon Franklin California Tax Free is expected to under-perform the Precious Metals. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin California Tax Free is 7.84 times less risky than Precious Metals. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Precious Metals Fund is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 3,758 in Precious Metals Fund on November 1, 2024 and sell it today you would earn a total of 530.00 from holding Precious Metals Fund or generate 14.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin California Tax Free vs. Precious Metals Fund
Performance |
| Timeline |
| Franklin California Tax |
| Precious Metals |
Franklin California and Precious Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin California and Precious Metals
The main advantage of trading using opposite Franklin California and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin California position performs unexpectedly, Precious Metals 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 Precious Metals will offset losses from the drop in Precious Metals' long position.| Franklin California vs. Precious Metals Fund | Franklin California vs. Vy Goldman Sachs | Franklin California vs. Sprott Gold Equity | Franklin California vs. International Investors Gold |
| Precious Metals vs. Energy Fund Investor | Precious Metals vs. Energy Services Fund | Precious Metals vs. Basic Materials Fund | Precious Metals vs. Health Care Fund |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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