Correlation Between Franklin California and California Bond
Can any of the company-specific risk be diversified away by investing in both Franklin California and California Bond 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 California Bond 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 California Bond Fund, you can compare the effects of market volatilities on Franklin California and California Bond 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 California Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin California and California Bond.
Diversification Opportunities for Franklin California and California Bond
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Franklin and California is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Franklin California Tax Free and California Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Bond 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 California Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Bond has no effect on the direction of Franklin California i.e., Franklin California and California Bond go up and down completely randomly.
Pair Corralation between Franklin California and California Bond
Assuming the 90 days horizon Franklin California Tax Free is expected to under-perform the California Bond. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin California Tax Free is 1.11 times less risky than California Bond. The mutual fund trades about -0.09 of its potential returns per unit of risk. The California Bond Fund is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 1,035 in California Bond Fund on November 4, 2024 and sell it today you would lose (4.00) from holding California Bond Fund or give up 0.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin California Tax Free vs. California Bond Fund
Performance |
| Timeline |
| Franklin California Tax |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| California Bond |
Franklin California and California Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin California and California Bond
The main advantage of trading using opposite Franklin California and California Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin California position performs unexpectedly, California Bond 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 California Bond will offset losses from the drop in California Bond's long position.The idea behind Franklin California Tax Free and California Bond Fund 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.
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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