Correlation Between American Funds and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Franklin Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Growth and Franklin Federal Limited Term, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Franklin Federal.
Diversification Opportunities for American Funds and Franklin Federal
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Franklin is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Growth 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 American Funds 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 American Funds Growth 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 American Funds i.e., American Funds and Franklin Federal go up and down completely randomly.
Pair Corralation between American Funds and Franklin Federal
Assuming the 90 days horizon American Funds Growth is expected to under-perform the Franklin Federal. In addition to that, American Funds is 7.16 times more volatile than Franklin Federal Limited Term. It trades about -0.19 of its total potential returns per unit of risk. Franklin Federal Limited Term is currently generating about 0.28 per unit of volatility. If you would invest 1,027 in Franklin Federal Limited Term on December 1, 2024 and sell it today you would earn a total of 7.00 from holding Franklin Federal Limited Term or generate 0.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Funds Growth vs. Franklin Federal Limited Term
Performance |
| Timeline |
| American Funds Growth |
| Franklin Federal Lim |
American Funds and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Franklin Federal
The main advantage of trading using opposite American Funds and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
| Franklin Federal vs. Doubleline Global Bond | Franklin Federal vs. Goldman Sachs Global | Franklin Federal vs. T Rowe Price | Franklin Federal vs. Wisdomtree Siegel 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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