Correlation Between Franklin Louisiana and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Franklin Louisiana and Franklin Mutual 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 Mutual 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 Mutual Beacon, you can compare the effects of market volatilities on Franklin Louisiana and Franklin Mutual 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 Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Louisiana and Franklin Mutual.
Diversification Opportunities for Franklin Louisiana and Franklin Mutual
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Franklin is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Louisiana Tax Free and Franklin Mutual Beacon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Beacon 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 Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Beacon has no effect on the direction of Franklin Louisiana i.e., Franklin Louisiana and Franklin Mutual go up and down completely randomly.
Pair Corralation between Franklin Louisiana and Franklin Mutual
Assuming the 90 days horizon Franklin Louisiana is expected to generate 1.98 times less return on investment than Franklin Mutual. But when comparing it to its historical volatility, Franklin Louisiana Tax Free is 2.97 times less risky than Franklin Mutual. It trades about 0.03 of its potential returns per unit of risk. Franklin Mutual Beacon is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,507 in Franklin Mutual Beacon on October 19, 2024 and sell it today you would earn a total of 113.00 from holding Franklin Mutual Beacon or generate 7.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Louisiana Tax Free vs. Franklin Mutual Beacon
Performance |
| Timeline |
| Franklin Louisiana Tax |
| Franklin Mutual Beacon |
Franklin Louisiana and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Louisiana and Franklin Mutual
The main advantage of trading using opposite Franklin Louisiana and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Louisiana position performs unexpectedly, Franklin Mutual 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 Mutual will offset losses from the drop in Franklin Mutual's long position.| Franklin Louisiana vs. Hunter Small Cap | Franklin Louisiana vs. Ab Small Cap | Franklin Louisiana vs. Smallcap Fund Fka | Franklin Louisiana vs. Vy Columbia Small |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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