Correlation Between Franklin Federal and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Emerging Markets 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 Emerging Markets 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 Emerging Markets Fund, you can compare the effects of market volatilities on Franklin Federal and Emerging Markets 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 Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Emerging Markets.
Diversification Opportunities for Franklin Federal and Emerging Markets
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Franklin and Emerging is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Limited Term and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets 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 Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Franklin Federal i.e., Franklin Federal and Emerging Markets go up and down completely randomly.
Pair Corralation between Franklin Federal and Emerging Markets
Assuming the 90 days horizon Franklin Federal Limited Term is expected to generate 0.17 times more return on investment than Emerging Markets. However, Franklin Federal Limited Term is 6.05 times less risky than Emerging Markets. It trades about 0.2 of its potential returns per unit of risk. Emerging Markets Fund is currently generating about -0.22 per unit of risk. If you would invest 1,026 in Franklin Federal Limited Term on August 29, 2024 and sell it today you would earn a total of 6.00 from holding Franklin Federal Limited Term or generate 0.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Franklin Federal Limited Term vs. Emerging Markets Fund
Performance |
| Timeline |
| Franklin Federal Lim |
| Emerging Markets |
Franklin Federal and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Emerging Markets
The main advantage of trading using opposite Franklin Federal and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.The idea behind Franklin Federal Limited Term and Emerging Markets Fund 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.
| Emerging Markets vs. Maryland Short Term Tax Free | Emerging Markets vs. Sterling Capital Short | Emerging Markets vs. Franklin Federal Limited Term | Emerging Markets vs. Vanguard Short Term Federal |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |