Correlation Between Franklin Government and Third Avenue
Can any of the company-specific risk be diversified away by investing in both Franklin Government and Third Avenue 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 Third Avenue 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 Third Avenue Small, you can compare the effects of market volatilities on Franklin Government and Third Avenue 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 Third Avenue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Government and Third Avenue.
Diversification Opportunities for Franklin Government and Third Avenue
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and Third is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Third Avenue Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Avenue Small 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 Third Avenue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Avenue Small has no effect on the direction of Franklin Government i.e., Franklin Government and Third Avenue go up and down completely randomly.
Pair Corralation between Franklin Government and Third Avenue
Assuming the 90 days horizon Franklin Government is expected to generate 4.89 times less return on investment than Third Avenue. But when comparing it to its historical volatility, Franklin Government Money is 8.74 times less risky than Third Avenue. It trades about 0.13 of its potential returns per unit of risk. Third Avenue Small is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,061 in Third Avenue Small on September 3, 2024 and sell it today you would earn a total of 197.00 from holding Third Avenue Small or generate 9.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Government Money vs. Third Avenue Small
Performance |
| Timeline |
| Franklin Government Money |
| Third Avenue Small |
Franklin Government and Third Avenue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Government and Third Avenue
The main advantage of trading using opposite Franklin Government and Third Avenue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Government position performs unexpectedly, Third Avenue 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 Third Avenue will offset losses from the drop in Third Avenue'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 |
| Third Avenue vs. Vy Goldman Sachs | Third Avenue vs. Sprott Gold Equity | Third Avenue vs. Short Precious Metals | Third Avenue vs. First Eagle Gold |
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.
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Transaction History View history of all your transactions and understand their impact on performance |