Correlation Between Franklin Louisiana and Franklin California
Can any of the company-specific risk be diversified away by investing in both Franklin Louisiana and Franklin California 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 Louisiana and Franklin California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Louisiana Tax Free and Franklin California High, you can compare the effects of market volatilities on Franklin Louisiana and Franklin California 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 Louisiana with a short position of Franklin California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Louisiana and Franklin California.
Diversification Opportunities for Franklin Louisiana and Franklin California
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Franklin and Franklin is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Louisiana Tax Free and Franklin California High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin California High and Franklin Louisiana 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 Louisiana Tax Free are associated (or correlated) with Franklin California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin California High has no effect on the direction of Franklin Louisiana i.e., Franklin Louisiana and Franklin California go up and down completely randomly.
Pair Corralation between Franklin Louisiana and Franklin California
Assuming the 90 days horizon Franklin Louisiana is expected to generate 1.21 times less return on investment than Franklin California. But when comparing it to its historical volatility, Franklin Louisiana Tax Free is 1.13 times less risky than Franklin California. It trades about 0.12 of its potential returns per unit of risk. Franklin California High is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 950.00 in Franklin California High on September 3, 2024 and sell it today you would earn a total of 50.00 from holding Franklin California High or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Louisiana Tax Free vs. Franklin California High
Performance |
| Timeline |
| Franklin Louisiana Tax |
| Franklin California High |
Franklin Louisiana and Franklin California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Louisiana and Franklin California
The main advantage of trading using opposite Franklin Louisiana and Franklin California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Louisiana position performs unexpectedly, Franklin California 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 Franklin California will offset losses from the drop in Franklin California's long position.| Franklin Louisiana vs. Lgm Risk Managed | Franklin Louisiana vs. Metropolitan West High | Franklin Louisiana vs. Ab High Income | Franklin Louisiana vs. Calvert High Yield |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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