Correlation Between Franklin Liberty and First Trust
Can any of the company-specific risk be diversified away by investing in both Franklin Liberty and First Trust 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 Liberty and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Liberty Federal and First Trust Municipal, you can compare the effects of market volatilities on Franklin Liberty and First Trust 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 Liberty with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and First Trust.
Diversification Opportunities for Franklin Liberty and First Trust
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and First is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Federal and First Trust Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Municipal and Franklin Liberty 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 Liberty Federal are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Municipal has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and First Trust go up and down completely randomly.
Pair Corralation between Franklin Liberty and First Trust
Given the investment horizon of 90 days Franklin Liberty Federal is expected to generate 1.04 times more return on investment than First Trust. However, Franklin Liberty is 1.04 times more volatile than First Trust Municipal. It trades about 0.19 of its potential returns per unit of risk. First Trust Municipal is currently generating about 0.14 per unit of risk. If you would invest 2,395 in Franklin Liberty Federal on September 1, 2024 and sell it today you would earn a total of 41.00 from holding Franklin Liberty Federal or generate 1.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Liberty Federal vs. First Trust Municipal
Performance |
| Timeline |
| Franklin Liberty Federal |
| First Trust Municipal |
Franklin Liberty and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Liberty and First Trust
The main advantage of trading using opposite Franklin Liberty and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Liberty position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Franklin Liberty vs. Franklin Liberty Intermediate | Franklin Liberty vs. IQ MacKay Municipal | Franklin Liberty vs. Xtrackers Municipal Infrastructure | Franklin Liberty vs. Hartford Municipal Opportunities |
| First Trust vs. SSGA Active Trust | First Trust vs. SPDR Nuveen Municipal | First Trust vs. iShares Short Maturity | First Trust vs. First Trust Flexible |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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