Correlation Between Franklin Government and Short-term Government
Can any of the company-specific risk be diversified away by investing in both Franklin Government and Short-term 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 Short-term 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 Short Term Government Fund, you can compare the effects of market volatilities on Franklin Government and Short-term 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 Short-term Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Government and Short-term Government.
Diversification Opportunities for Franklin Government and Short-term Government
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Franklin and Short-term is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Short Term Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Government 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 Short-term Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Government has no effect on the direction of Franklin Government i.e., Franklin Government and Short-term Government go up and down completely randomly.
Pair Corralation between Franklin Government and Short-term Government
Assuming the 90 days horizon Franklin Government Money is expected to generate 0.79 times more return on investment than Short-term Government. However, Franklin Government Money is 1.27 times less risky than Short-term Government. It trades about 0.13 of its potential returns per unit of risk. Short Term Government Fund is currently generating about 0.05 per unit of risk. If you would invest 92.00 in Franklin Government Money on September 3, 2024 and sell it today you would earn a total of 8.00 from holding Franklin Government Money or generate 8.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franklin Government Money vs. Short Term Government Fund
Performance |
| Timeline |
| Franklin Government Money |
| Short Term Government |
Franklin Government and Short-term Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Government and Short-term Government
The main advantage of trading using opposite Franklin Government and Short-term Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Government position performs unexpectedly, Short-term 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 Short-term Government will offset losses from the drop in Short-term 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 |
| Short-term Government vs. Gmo High Yield | Short-term Government vs. Dreyfusstandish Global Fixed | Short-term Government vs. Maryland Tax Free Bond | Short-term Government vs. Limited Term Tax |
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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