Correlation Between Mfs California and Franklin California

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Can any of the company-specific risk be diversified away by investing in both Mfs California and Franklin California 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 Mfs California and Franklin California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mfs California Municipal and Franklin California Tax Free, you can compare the effects of market volatilities on Mfs California and Franklin California 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 Mfs California with a short position of Franklin California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs California and Franklin California.

Diversification Opportunities for Mfs California and Franklin California

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between Mfs and Franklin is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Mfs California Municipal and Franklin California Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin California Tax and Mfs California 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 Mfs California Municipal are associated (or correlated) with Franklin California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin California Tax has no effect on the direction of Mfs California i.e., Mfs California and Franklin California go up and down completely randomly.

Pair Corralation between Mfs California and Franklin California

Assuming the 90 days horizon Mfs California is expected to generate 1.15 times less return on investment than Franklin California. In addition to that, Mfs California is 1.03 times more volatile than Franklin California Tax Free. It trades about 0.06 of its total potential returns per unit of risk. Franklin California Tax Free is currently generating about 0.07 per unit of volatility. If you would invest  635.00  in Franklin California Tax Free on September 4, 2024 and sell it today you would earn a total of  59.00  from holding Franklin California Tax Free or generate 9.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Mfs California Municipal  vs.  Franklin California Tax Free

 Performance 
       Timeline  
Mfs California Municipal 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Mfs California Municipal are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mfs California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Franklin California Tax 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Franklin California Tax Free are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs California and Franklin California Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mfs California and Franklin California

The main advantage of trading using opposite Mfs California and Franklin California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mfs California position performs unexpectedly, Franklin California 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 California will offset losses from the drop in Franklin California's long position.
The idea behind Mfs California Municipal and Franklin California Tax Free 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.
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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