Correlation Between Western Asset and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Franklin Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Smash and Franklin Federal Limited Term, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Franklin Federal.
Diversification Opportunities for Western Asset and Franklin Federal
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Western and Franklin is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Smash and Franklin Federal Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Federal Lim and Western Asset 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 Western Asset Smash 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 Lim has no effect on the direction of Western Asset i.e., Western Asset and Franklin Federal go up and down completely randomly.
Pair Corralation between Western Asset and Franklin Federal
Assuming the 90 days horizon Western Asset is expected to generate 1.94 times less return on investment than Franklin Federal. In addition to that, Western Asset is 5.11 times more volatile than Franklin Federal Limited Term. It trades about 0.01 of its total potential returns per unit of risk. Franklin Federal Limited Term is currently generating about 0.15 per unit of volatility. If you would invest 956.00 in Franklin Federal Limited Term on September 13, 2024 and sell it today you would earn a total of 78.00 from holding Franklin Federal Limited Term or generate 8.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Western Asset Smash vs. Franklin Federal Limited Term
Performance |
| Timeline |
| Western Asset Smash |
| Franklin Federal Lim |
Western Asset and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Franklin Federal
The main advantage of trading using opposite Western Asset and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. Investec Emerging Markets | Western Asset vs. Sp Midcap Index | Western Asset vs. Aqr Long Short Equity | Western Asset vs. T Rowe Price |
| Franklin Federal vs. Franklin Mutual Beacon | Franklin Federal vs. Templeton Developing Markets | Franklin Federal vs. Franklin Mutual Global | Franklin Federal vs. Franklin Mutual Global |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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