Correlation Between Franklin Liberty and Xtrackers Municipal
Can any of the company-specific risk be diversified away by investing in both Franklin Liberty and Xtrackers Municipal 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 Xtrackers Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Liberty Intermediate and Xtrackers Municipal Infrastructure, you can compare the effects of market volatilities on Franklin Liberty and Xtrackers Municipal 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 Xtrackers Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and Xtrackers Municipal.
Diversification Opportunities for Franklin Liberty and Xtrackers Municipal
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Xtrackers is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Intermediate and Xtrackers Municipal Infrastruc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers 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 Intermediate are associated (or correlated) with Xtrackers Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Municipal has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Xtrackers Municipal go up and down completely randomly.
Pair Corralation between Franklin Liberty and Xtrackers Municipal
Given the investment horizon of 90 days Franklin Liberty is expected to generate 2.15 times less return on investment than Xtrackers Municipal. But when comparing it to its historical volatility, Franklin Liberty Intermediate is 1.46 times less risky than Xtrackers Municipal. It trades about 0.1 of its potential returns per unit of risk. Xtrackers Municipal Infrastructure is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,542 in Xtrackers Municipal Infrastructure on August 29, 2024 and sell it today you would earn a total of 49.00 from holding Xtrackers Municipal Infrastructure or generate 1.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Liberty Intermediate vs. Xtrackers Municipal Infrastruc
Performance |
| Timeline |
| Franklin Liberty Int |
| Xtrackers Municipal |
Franklin Liberty and Xtrackers Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Liberty and Xtrackers Municipal
The main advantage of trading using opposite Franklin Liberty and Xtrackers Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Liberty position performs unexpectedly, Xtrackers Municipal 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 Xtrackers Municipal will offset losses from the drop in Xtrackers Municipal's long position.| Franklin Liberty vs. Franklin Liberty Federal | Franklin Liberty vs. Hartford Municipal Opportunities | Franklin Liberty vs. IQ MacKay Municipal | Franklin Liberty vs. First Trust Municipal |
| Xtrackers Municipal vs. VanEck Long Muni | Xtrackers Municipal vs. VanEck Short High | Xtrackers Municipal vs. VanEck CEF Municipal | Xtrackers Municipal vs. PIMCO Short Term |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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