Correlation Between Xtrackers Municipal and Franklin Liberty
Can any of the company-specific risk be diversified away by investing in both Xtrackers Municipal and Franklin Liberty 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 Xtrackers Municipal and Franklin Liberty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers Municipal Infrastructure and Franklin Liberty Federal, you can compare the effects of market volatilities on Xtrackers Municipal and Franklin Liberty 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 Xtrackers Municipal with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Municipal and Franklin Liberty.
Diversification Opportunities for Xtrackers Municipal and Franklin Liberty
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Xtrackers and Franklin is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Municipal Infrastruc and Franklin Liberty Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Federal and Xtrackers Municipal 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 Xtrackers Municipal Infrastructure are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Federal has no effect on the direction of Xtrackers Municipal i.e., Xtrackers Municipal and Franklin Liberty go up and down completely randomly.
Pair Corralation between Xtrackers Municipal and Franklin Liberty
Given the investment horizon of 90 days Xtrackers Municipal Infrastructure is expected to under-perform the Franklin Liberty. In addition to that, Xtrackers Municipal is 1.44 times more volatile than Franklin Liberty Federal. It trades about -0.05 of its total potential returns per unit of risk. Franklin Liberty Federal is currently generating about -0.02 per unit of volatility. If you would invest 2,385 in Franklin Liberty Federal on October 22, 2024 and sell it today you would lose (11.00) from holding Franklin Liberty Federal or give up 0.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers Municipal Infrastruc vs. Franklin Liberty Federal
Performance |
| Timeline |
| Xtrackers Municipal |
| Franklin Liberty Federal |
Xtrackers Municipal and Franklin Liberty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers Municipal and Franklin Liberty
The main advantage of trading using opposite Xtrackers Municipal and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers Municipal position performs unexpectedly, Franklin Liberty 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 Liberty will offset losses from the drop in Franklin Liberty's long position.| Xtrackers Municipal vs. VanEck Long Muni | Xtrackers Municipal vs. VanEck Short High | Xtrackers Municipal vs. VanEck CEF Municipal | Xtrackers Municipal vs. PIMCO Short Term |
| Franklin Liberty vs. Franklin Liberty Intermediate | Franklin Liberty vs. IQ MacKay Municipal | Franklin Liberty vs. Xtrackers Municipal Infrastructure | Franklin Liberty vs. Hartford Municipal Opportunities |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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