Correlation Between Franklin California and Federated Government
Can any of the company-specific risk be diversified away by investing in both Franklin California and Federated Government 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 California and Federated Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin California Tax Free and Federated Government Ultrashort, you can compare the effects of market volatilities on Franklin California and Federated Government 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 California with a short position of Federated Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin California and Federated Government.
Diversification Opportunities for Franklin California and Federated Government
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Franklin and Federated is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Franklin California Tax Free and Federated Government Ultrashor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Government and Franklin California 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 California Tax Free are associated (or correlated) with Federated Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Government has no effect on the direction of Franklin California i.e., Franklin California and Federated Government go up and down completely randomly.
Pair Corralation between Franklin California and Federated Government
Assuming the 90 days horizon Franklin California is expected to generate 1.15 times less return on investment than Federated Government. In addition to that, Franklin California is 2.65 times more volatile than Federated Government Ultrashort. It trades about 0.09 of its total potential returns per unit of risk. Federated Government Ultrashort is currently generating about 0.26 per unit of volatility. If you would invest 972.00 in Federated Government Ultrashort on November 27, 2024 and sell it today you would earn a total of 5.00 from holding Federated Government Ultrashort or generate 0.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin California Tax Free vs. Federated Government Ultrashor
Performance |
| Timeline |
| Franklin California Tax |
| Federated Government |
Franklin California and Federated Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin California and Federated Government
The main advantage of trading using opposite Franklin California and Federated Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin California position performs unexpectedly, Federated Government 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 Federated Government will offset losses from the drop in Federated Government's long position.| Franklin California vs. T Rowe Price | Franklin California vs. T Rowe Price | Franklin California vs. Ultrasmall Cap Profund Ultrasmall Cap | Franklin California vs. Transamerica Financial Life |
| Federated Government vs. Jpmorgan Large Cap | Federated Government vs. M Large Cap | Federated Government vs. Tiaa Cref Large Cap Growth | Federated Government vs. Vest Large Cap |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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