Correlation Between Franklin Government and Inverse Government
Can any of the company-specific risk be diversified away by investing in both Franklin Government and Inverse 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 Government and Inverse Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Government Money and Inverse Government Long, you can compare the effects of market volatilities on Franklin Government and Inverse 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 Government with a short position of Inverse Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Government and Inverse Government.
Diversification Opportunities for Franklin Government and Inverse Government
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Inverse is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Inverse Government Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Government Long and Franklin Government 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 Government Money are associated (or correlated) with Inverse Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Government Long has no effect on the direction of Franklin Government i.e., Franklin Government and Inverse Government go up and down completely randomly.
Pair Corralation between Franklin Government and Inverse Government
Assuming the 90 days horizon Franklin Government is expected to generate 2.88 times less return on investment than Inverse Government. But when comparing it to its historical volatility, Franklin Government Money is 7.68 times less risky than Inverse Government. It trades about 0.13 of its potential returns per unit of risk. Inverse Government Long is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 15,308 in Inverse Government Long on September 3, 2024 and sell it today you would earn a total of 3,674 from holding Inverse Government Long or generate 24.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Government Money vs. Inverse Government Long
Performance |
| Timeline |
| Franklin Government Money |
| Inverse Government Long |
Franklin Government and Inverse Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Government and Inverse Government
The main advantage of trading using opposite Franklin Government and Inverse Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Government position performs unexpectedly, Inverse 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 Inverse Government will offset losses from the drop in Inverse Government's long position.| Franklin Government vs. Vanguard Total Stock | Franklin Government vs. Vanguard 500 Index | Franklin Government vs. Vanguard Total Stock | Franklin Government vs. Vanguard Total Stock |
| Inverse Government vs. Dana Large Cap | Inverse Government vs. Pace Large Value | Inverse Government vs. Siit Large Cap | Inverse Government vs. American Mutual Fund |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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