Correlation Between Strategic Advisers and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Strategic Advisers 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 Strategic Advisers and Franklin Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Advisers Municipal and Franklin Federal Tax Free, you can compare the effects of market volatilities on Strategic Advisers 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 Strategic Advisers with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Advisers and Franklin Federal.
Diversification Opportunities for Strategic Advisers and Franklin Federal
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Strategic and Franklin is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Advisers Municipal and Franklin Federal Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Federal Tax and Strategic Advisers 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 Strategic Advisers Municipal 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 Tax has no effect on the direction of Strategic Advisers i.e., Strategic Advisers and Franklin Federal go up and down completely randomly.
Pair Corralation between Strategic Advisers and Franklin Federal
Assuming the 90 days horizon Strategic Advisers Municipal is expected to generate 0.94 times more return on investment than Franklin Federal. However, Strategic Advisers Municipal is 1.07 times less risky than Franklin Federal. It trades about 0.06 of its potential returns per unit of risk. Franklin Federal Tax Free is currently generating about 0.05 per unit of risk. If you would invest 820.00 in Strategic Advisers Municipal on October 25, 2024 and sell it today you would earn a total of 64.00 from holding Strategic Advisers Municipal or generate 7.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Advisers Municipal vs. Franklin Federal Tax Free
Performance |
| Timeline |
| Strategic Advisers |
| Franklin Federal Tax |
Strategic Advisers and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Advisers and Franklin Federal
The main advantage of trading using opposite Strategic Advisers and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Advisers 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.The idea behind Strategic Advisers Municipal and Franklin Federal Tax Free pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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