Correlation Between Franklin Federal and Nationwide Bond
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Nationwide Bond 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 Nationwide Bond 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 Nationwide Bond Index, you can compare the effects of market volatilities on Franklin Federal and Nationwide Bond 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 Nationwide Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Nationwide Bond.
Diversification Opportunities for Franklin Federal and Nationwide Bond
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Franklin and Nationwide is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Limited Term and Nationwide Bond Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Bond Index 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 Nationwide Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Bond Index has no effect on the direction of Franklin Federal i.e., Franklin Federal and Nationwide Bond go up and down completely randomly.
Pair Corralation between Franklin Federal and Nationwide Bond
Assuming the 90 days horizon Franklin Federal is expected to generate 1.16 times less return on investment than Nationwide Bond. But when comparing it to its historical volatility, Franklin Federal Limited Term is 3.05 times less risky than Nationwide Bond. It trades about 0.22 of its potential returns per unit of risk. Nationwide Bond Index is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 931.00 in Nationwide Bond Index on September 1, 2024 and sell it today you would earn a total of 32.00 from holding Nationwide Bond Index or generate 3.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Franklin Federal Limited Term vs. Nationwide Bond Index
Performance |
| Timeline |
| Franklin Federal Lim |
| Nationwide Bond Index |
Franklin Federal and Nationwide Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Nationwide Bond
The main advantage of trading using opposite Franklin Federal and Nationwide Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Nationwide Bond 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 Nationwide Bond will offset losses from the drop in Nationwide Bond's long position.| Franklin Federal vs. Small Midcap Dividend Income | Franklin Federal vs. Tax Managed Mid Small | Franklin Federal vs. Touchstone Small Cap | Franklin Federal vs. Jpmorgan Small Cap |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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