Correlation Between Franklin Minnesota and Columbia Minnesota

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Can any of the company-specific risk be diversified away by investing in both Franklin Minnesota and Columbia Minnesota 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 Minnesota and Columbia Minnesota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Minnesota Tax Free and Columbia Minnesota Tax Exempt, you can compare the effects of market volatilities on Franklin Minnesota and Columbia Minnesota 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 Minnesota with a short position of Columbia Minnesota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Minnesota and Columbia Minnesota.

Diversification Opportunities for Franklin Minnesota and Columbia Minnesota

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Franklin and Columbia is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Minnesota Tax Free and Columbia Minnesota Tax Exempt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Minnesota Tax and Franklin Minnesota 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 Minnesota Tax Free are associated (or correlated) with Columbia Minnesota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Minnesota Tax has no effect on the direction of Franklin Minnesota i.e., Franklin Minnesota and Columbia Minnesota go up and down completely randomly.

Pair Corralation between Franklin Minnesota and Columbia Minnesota

Assuming the 90 days horizon Franklin Minnesota Tax Free is expected to generate 0.97 times more return on investment than Columbia Minnesota. However, Franklin Minnesota Tax Free is 1.03 times less risky than Columbia Minnesota. It trades about 0.06 of its potential returns per unit of risk. Columbia Minnesota Tax Exempt is currently generating about 0.05 per unit of risk. If you would invest  1,047  in Franklin Minnesota Tax Free on September 13, 2024 and sell it today you would earn a total of  84.00  from holding Franklin Minnesota Tax Free or generate 8.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Franklin Minnesota Tax Free  vs.  Columbia Minnesota Tax Exempt

 Performance 
       Timeline  
Franklin Minnesota Tax 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Minnesota Tax Free are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Minnesota is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Columbia Minnesota Tax 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days Columbia Minnesota Tax Exempt has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Columbia Minnesota is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Minnesota and Columbia Minnesota Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Franklin Minnesota and Columbia Minnesota

The main advantage of trading using opposite Franklin Minnesota and Columbia Minnesota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Minnesota position performs unexpectedly, Columbia Minnesota 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 Columbia Minnesota will offset losses from the drop in Columbia Minnesota's long position.
The idea behind Franklin Minnesota Tax Free and Columbia Minnesota Tax Exempt pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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