Correlation Between Franklin Minnesota and Fidelity Minnesota
Can any of the company-specific risk be diversified away by investing in both Franklin Minnesota and Fidelity 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 Fidelity 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 Fidelity Minnesota Municipal, you can compare the effects of market volatilities on Franklin Minnesota and Fidelity 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 Fidelity Minnesota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Minnesota and Fidelity Minnesota.
Diversification Opportunities for Franklin Minnesota and Fidelity Minnesota
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Fidelity is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Minnesota Tax Free and Fidelity Minnesota Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Minnesota 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 Fidelity Minnesota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Minnesota has no effect on the direction of Franklin Minnesota i.e., Franklin Minnesota and Fidelity Minnesota go up and down completely randomly.
Pair Corralation between Franklin Minnesota and Fidelity Minnesota
Assuming the 90 days horizon Franklin Minnesota Tax Free is expected to generate 1.22 times more return on investment than Fidelity Minnesota. However, Franklin Minnesota is 1.22 times more volatile than Fidelity Minnesota Municipal. It trades about 0.04 of its potential returns per unit of risk. Fidelity Minnesota Municipal is currently generating about 0.04 per unit of risk. If you would invest 1,131 in Franklin Minnesota Tax Free on September 12, 2024 and sell it today you would earn a total of 8.00 from holding Franklin Minnesota Tax Free or generate 0.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.41% |
| Values | Daily Returns |
Franklin Minnesota Tax Free vs. Fidelity Minnesota Municipal
Performance |
| Timeline |
| Franklin Minnesota Tax |
| Fidelity Minnesota |
Franklin Minnesota and Fidelity Minnesota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Minnesota and Fidelity Minnesota
The main advantage of trading using opposite Franklin Minnesota and Fidelity Minnesota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Minnesota position performs unexpectedly, Fidelity 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 Fidelity Minnesota will offset losses from the drop in Fidelity Minnesota's long position.The idea behind Franklin Minnesota Tax Free and Fidelity Minnesota Municipal 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.
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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