Correlation Between Franklin Federal and Western Asset
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Western Asset 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 Western Asset 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 Western Asset E, you can compare the effects of market volatilities on Franklin Federal and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Western Asset.
Diversification Opportunities for Franklin Federal and Western Asset
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Franklin and Western is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Limited Term and Western Asset E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset E 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset E has no effect on the direction of Franklin Federal i.e., Franklin Federal and Western Asset go up and down completely randomly.
Pair Corralation between Franklin Federal and Western Asset
Assuming the 90 days horizon Franklin Federal is expected to generate 2.42 times less return on investment than Western Asset. But when comparing it to its historical volatility, Franklin Federal Limited Term is 3.37 times less risky than Western Asset. It trades about 0.15 of its potential returns per unit of risk. Western Asset E is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 921.00 in Western Asset E on September 1, 2024 and sell it today you would earn a total of 9.00 from holding Western Asset E or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Franklin Federal Limited Term vs. Western Asset E
Performance |
| Timeline |
| Franklin Federal Lim |
| Western Asset E |
Franklin Federal and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franklin Federal and Western Asset
The main advantage of trading using opposite Franklin Federal and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset'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 |
| Western Asset vs. Aqr Sustainable Long Short | Western Asset vs. Franklin Federal Limited Term | Western Asset vs. Siit Ultra Short | Western Asset vs. Touchstone Ultra Short |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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