Correlation Between Gmo High and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Gmo High 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 Gmo High and Franklin Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo High Yield and Franklin Federal Tax Free, you can compare the effects of market volatilities on Gmo High 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 Gmo High with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Franklin Federal.
Diversification Opportunities for Gmo High and Franklin Federal
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gmo and Franklin is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield 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 Gmo High 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 Gmo High Yield 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 Gmo High i.e., Gmo High and Franklin Federal go up and down completely randomly.
Pair Corralation between Gmo High and Franklin Federal
Assuming the 90 days horizon Gmo High Yield is expected to generate 0.55 times more return on investment than Franklin Federal. However, Gmo High Yield is 1.8 times less risky than Franklin Federal. It trades about 0.38 of its potential returns per unit of risk. Franklin Federal Tax Free is currently generating about 0.17 per unit of risk. If you would invest 1,787 in Gmo High Yield on September 3, 2024 and sell it today you would earn a total of 25.00 from holding Gmo High Yield or generate 1.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo High Yield vs. Franklin Federal Tax Free
Performance |
| Timeline |
| Gmo High Yield |
| Franklin Federal Tax |
Gmo High and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Franklin Federal
The main advantage of trading using opposite Gmo High and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High 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.| Gmo High vs. Vanguard High Yield Corporate | Gmo High vs. Vanguard High Yield Porate | Gmo High vs. Blackrock Hi Yld | Gmo High vs. Blackrock High Yield |
| Franklin Federal vs. Siit High Yield | Franklin Federal vs. Pgim High Yield | Franklin Federal vs. Blackrock High Yield | Franklin Federal vs. Gmo High Yield |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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