Correlation Between Franklin Ohio and Sparta Capital
Can any of the company-specific risk be diversified away by investing in both Franklin Ohio and Sparta Capital 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 Ohio and Sparta Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Ohio Tax Free and Sparta Capital, you can compare the effects of market volatilities on Franklin Ohio and Sparta Capital 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 Ohio with a short position of Sparta Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Ohio and Sparta Capital.
Diversification Opportunities for Franklin Ohio and Sparta Capital
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Franklin and Sparta is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Ohio Tax Free and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital and Franklin Ohio 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 Ohio Tax Free are associated (or correlated) with Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Franklin Ohio i.e., Franklin Ohio and Sparta Capital go up and down completely randomly.
Pair Corralation between Franklin Ohio and Sparta Capital
Assuming the 90 days horizon Franklin Ohio is expected to generate 19.36 times less return on investment than Sparta Capital. But when comparing it to its historical volatility, Franklin Ohio Tax Free is 48.71 times less risky than Sparta Capital. It trades about 0.09 of its potential returns per unit of risk. Sparta Capital is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1.21 in Sparta Capital on September 2, 2024 and sell it today you would earn a total of 0.29 from holding Sparta Capital or generate 23.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Ohio Tax Free vs. Sparta Capital
Performance |
| Timeline |
| Franklin Ohio Tax |
| Sparta Capital |
Franklin Ohio and Sparta Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Ohio and Sparta Capital
The main advantage of trading using opposite Franklin Ohio and Sparta Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Ohio position performs unexpectedly, Sparta Capital 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 Sparta Capital will offset losses from the drop in Sparta Capital's long position.| Franklin Ohio vs. Franklin Mutual Beacon | Franklin Ohio vs. Templeton Developing Markets | Franklin Ohio vs. Franklin Mutual Global | Franklin Ohio vs. Franklin Mutual Global |
| Sparta Capital vs. Zurn Elkay Water | Sparta Capital vs. Federal Signal | Sparta Capital vs. Energy Recovery | Sparta Capital vs. CECO Environmental Corp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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