Correlation Between Franklin High and Franklin California
Can any of the company-specific risk be diversified away by investing in both Franklin High 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 High 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 High Yield and Franklin California Intermediate Term, you can compare the effects of market volatilities on Franklin High 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 High with a short position of Franklin California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin High and Franklin California.
Diversification Opportunities for Franklin High and Franklin California
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Franklin is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Yield and Franklin California Intermedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin California and Franklin High 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 High Yield 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 has no effect on the direction of Franklin High i.e., Franklin High and Franklin California go up and down completely randomly.
Pair Corralation between Franklin High and Franklin California
Assuming the 90 days horizon Franklin High Yield is expected to generate 1.61 times more return on investment than Franklin California. However, Franklin High is 1.61 times more volatile than Franklin California Intermediate Term. It trades about 0.16 of its potential returns per unit of risk. Franklin California Intermediate Term is currently generating about 0.12 per unit of risk. If you would invest 854.00 in Franklin High Yield on September 3, 2024 and sell it today you would earn a total of 59.00 from holding Franklin High Yield or generate 6.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin High Yield vs. Franklin California Intermedia
Performance |
| Timeline |
| Franklin High Yield |
| Franklin California |
Franklin High and Franklin California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin High and Franklin California
The main advantage of trading using opposite Franklin High and Franklin California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin High 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 High vs. Nuveen High Yield | Franklin High vs. Nuveen High Yield | Franklin High vs. Nuveen High Yield | Franklin High vs. American High Income Municipal |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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