Correlation Between Fidelity Municipal and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Fidelity Municipal and Franklin Federal 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 Fidelity Municipal and Franklin Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Municipal Income and Franklin Federal Limited Term, you can compare the effects of market volatilities on Fidelity Municipal and Franklin Federal 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 Fidelity Municipal with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Municipal and Franklin Federal.
Diversification Opportunities for Fidelity Municipal and Franklin Federal
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fidelity and Franklin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Municipal Income and Franklin Federal Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Federal Lim and Fidelity Municipal 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 Fidelity Municipal Income are associated (or correlated) with Franklin Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Federal Lim has no effect on the direction of Fidelity Municipal i.e., Fidelity Municipal and Franklin Federal go up and down completely randomly.
Pair Corralation between Fidelity Municipal and Franklin Federal
Assuming the 90 days horizon Fidelity Municipal Income is expected to generate 2.27 times more return on investment than Franklin Federal. However, Fidelity Municipal is 2.27 times more volatile than Franklin Federal Limited Term. It trades about 0.07 of its potential returns per unit of risk. Franklin Federal Limited Term is currently generating about 0.14 per unit of risk. If you would invest 1,135 in Fidelity Municipal Income on August 31, 2024 and sell it today you would earn a total of 101.00 from holding Fidelity Municipal Income or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Municipal Income vs. Franklin Federal Limited Term
Performance |
| Timeline |
| Fidelity Municipal Income |
| Franklin Federal Lim |
Fidelity Municipal and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Municipal and Franklin Federal
The main advantage of trading using opposite Fidelity Municipal and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Municipal position performs unexpectedly, Franklin Federal 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 Federal will offset losses from the drop in Franklin Federal's long position.| Fidelity Municipal vs. Franklin Federal Limited Term | Fidelity Municipal vs. Aqr Long Short Equity | Fidelity Municipal vs. The Short Term | Fidelity Municipal vs. Short Intermediate Bond Fund |
| Franklin Federal vs. Pro Blend Moderate Term | Franklin Federal vs. Wisdomtree Siegel Moderate | Franklin Federal vs. Blackrock Moderate Prepared | Franklin Federal vs. Lifestyle Ii Moderate |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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