Correlation Between Maryland Short-term and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Maryland Short-term 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 Maryland Short-term and Franklin Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Maryland Short Term Tax Free and Franklin Federal Limited Term, you can compare the effects of market volatilities on Maryland Short-term 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 Maryland Short-term with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maryland Short-term and Franklin Federal.
Diversification Opportunities for Maryland Short-term and Franklin Federal
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Maryland and Franklin is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Maryland Short Term Tax Free 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 Maryland Short-term 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 Maryland Short Term Tax Free 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 Maryland Short-term i.e., Maryland Short-term and Franklin Federal go up and down completely randomly.
Pair Corralation between Maryland Short-term and Franklin Federal
Assuming the 90 days horizon Maryland Short Term Tax Free is expected to generate about the same return on investment as Franklin Federal Limited Term. However, Maryland Short-term is 1.0 times more volatile than Franklin Federal Limited Term. It trades about 0.15 of its potential returns per unit of risk. Franklin Federal Limited Term is currently producing about 0.15 per unit of risk. If you would invest 1,029 in Franklin Federal Limited Term on September 1, 2024 and sell it today you would earn a total of 4.00 from holding Franklin Federal Limited Term or generate 0.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maryland Short Term Tax Free vs. Franklin Federal Limited Term
Performance |
| Timeline |
| Maryland Short Term |
| Franklin Federal Lim |
Maryland Short-term and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maryland Short-term and Franklin Federal
The main advantage of trading using opposite Maryland Short-term and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maryland Short-term 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.| Maryland Short-term vs. Maryland Tax Free Bond | Maryland Short-term vs. Georgia Tax Free Bond | Maryland Short-term vs. New York Tax Free | Maryland Short-term vs. New Jersey Tax Free |
| 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 |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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