Correlation Between Franklin Federal and Franklin New
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Franklin New 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 Federal and Franklin New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Federal Limited Term and Franklin New York, you can compare the effects of market volatilities on Franklin Federal and Franklin New 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 Federal with a short position of Franklin New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Franklin New.
Diversification Opportunities for Franklin Federal and Franklin New
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Franklin and Franklin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Limited Term and Franklin New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin New York and Franklin Federal 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 Federal Limited Term are associated (or correlated) with Franklin New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin New York has no effect on the direction of Franklin Federal i.e., Franklin Federal and Franklin New go up and down completely randomly.
Pair Corralation between Franklin Federal and Franklin New
Assuming the 90 days horizon Franklin Federal is expected to generate 1.35 times less return on investment than Franklin New. But when comparing it to its historical volatility, Franklin Federal Limited Term is 2.48 times less risky than Franklin New. It trades about 0.21 of its potential returns per unit of risk. Franklin New York is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 930.00 in Franklin New York on September 14, 2024 and sell it today you would earn a total of 72.00 from holding Franklin New York or generate 7.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Franklin Federal Limited Term vs. Franklin New York
Performance |
| Timeline |
| Franklin Federal Lim |
| Franklin New York |
Franklin Federal and Franklin New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Franklin New
The main advantage of trading using opposite Franklin Federal and Franklin New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Franklin New 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 New will offset losses from the drop in Franklin New's long position.| Franklin Federal vs. Alliancebernstein National Municipal | Franklin Federal vs. California High Yield Municipal | Franklin Federal vs. Gamco Global Telecommunications | Franklin Federal vs. T Rowe Price |
| Franklin New vs. Franklin Federal Limited Term | Franklin New vs. Delaware Investments Ultrashort | Franklin New vs. Angel Oak Ultrashort | Franklin New vs. Boston Partners Longshort |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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