Correlation Between Franklin Liberty and PIMCO Intermediate
Can any of the company-specific risk be diversified away by investing in both Franklin Liberty and PIMCO Intermediate 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 PIMCO Intermediate 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 PIMCO Intermediate Municipal, you can compare the effects of market volatilities on Franklin Liberty and PIMCO Intermediate 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 PIMCO Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and PIMCO Intermediate.
Diversification Opportunities for Franklin Liberty and PIMCO Intermediate
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and PIMCO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Federal and PIMCO Intermediate Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Intermediate 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 PIMCO Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Intermediate has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and PIMCO Intermediate go up and down completely randomly.
Pair Corralation between Franklin Liberty and PIMCO Intermediate
Given the investment horizon of 90 days Franklin Liberty Federal is expected to generate 1.53 times more return on investment than PIMCO Intermediate. However, Franklin Liberty is 1.53 times more volatile than PIMCO Intermediate Municipal. It trades about 0.07 of its potential returns per unit of risk. PIMCO Intermediate Municipal is currently generating about 0.08 per unit of risk. If you would invest 2,208 in Franklin Liberty Federal on September 4, 2024 and sell it today you would earn a total of 234.00 from holding Franklin Liberty Federal or generate 10.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Liberty Federal vs. PIMCO Intermediate Municipal
Performance |
| Timeline |
| Franklin Liberty Federal |
| PIMCO Intermediate |
Franklin Liberty and PIMCO Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Liberty and PIMCO Intermediate
The main advantage of trading using opposite Franklin Liberty and PIMCO Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Liberty position performs unexpectedly, PIMCO Intermediate 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 PIMCO Intermediate will offset losses from the drop in PIMCO Intermediate'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 |
| PIMCO Intermediate vs. PIMCO Short Term | PIMCO Intermediate vs. VanEck Intermediate Muni | PIMCO Intermediate vs. VanEck Long Muni | PIMCO Intermediate vs. VanEck Short Muni |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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