Correlation Between Franklin Liberty and Overlay Shares
Can any of the company-specific risk be diversified away by investing in both Franklin Liberty and Overlay Shares 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 Overlay Shares 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 Overlay Shares Municipal, you can compare the effects of market volatilities on Franklin Liberty and Overlay Shares 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 Overlay Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and Overlay Shares.
Diversification Opportunities for Franklin Liberty and Overlay Shares
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Overlay is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Federal and Overlay Shares Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares 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 Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Municipal has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Overlay Shares go up and down completely randomly.
Pair Corralation between Franklin Liberty and Overlay Shares
Given the investment horizon of 90 days Franklin Liberty Federal is expected to generate 1.32 times more return on investment than Overlay Shares. However, Franklin Liberty is 1.32 times more volatile than Overlay Shares Municipal. It trades about 0.06 of its potential returns per unit of risk. Overlay Shares Municipal is currently generating about 0.07 per unit of risk. If you would invest 2,400 in Franklin Liberty Federal on August 23, 2024 and sell it today you would earn a total of 15.00 from holding Franklin Liberty Federal or generate 0.63% 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. Overlay Shares Municipal
Performance |
| Timeline |
| Franklin Liberty Federal |
| Overlay Shares Municipal |
Franklin Liberty and Overlay Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Liberty and Overlay Shares
The main advantage of trading using opposite Franklin Liberty and Overlay Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Liberty position performs unexpectedly, Overlay Shares 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 Overlay Shares will offset losses from the drop in Overlay Shares' long position.| Franklin Liberty vs. IQ MacKay Municipal | Franklin Liberty vs. Columbia Multi Sector Municipal | Franklin Liberty vs. Hartford Municipal Opportunities | Franklin Liberty vs. iShares Short Maturity |
| Overlay Shares vs. Overlay Shares Core | Overlay Shares vs. Overlay Shares Large | Overlay Shares vs. Overlay Shares Foreign | Overlay Shares vs. OVS SpA |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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