Correlation Between Transam Short and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Transam Short 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 Transam Short and Franklin Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transam Short Term Bond and Franklin Federal Tax Free, you can compare the effects of market volatilities on Transam Short 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 Transam Short with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transam Short and Franklin Federal.
Diversification Opportunities for Transam Short and Franklin Federal
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Transam and Franklin is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Transam Short Term Bond and Franklin Federal Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Federal Tax and Transam Short 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 Transam Short Term Bond 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 Tax has no effect on the direction of Transam Short i.e., Transam Short and Franklin Federal go up and down completely randomly.
Pair Corralation between Transam Short and Franklin Federal
Assuming the 90 days horizon Transam Short Term Bond is expected to generate 0.53 times more return on investment than Franklin Federal. However, Transam Short Term Bond is 1.9 times less risky than Franklin Federal. It trades about 0.25 of its potential returns per unit of risk. Franklin Federal Tax Free is currently generating about 0.06 per unit of risk. If you would invest 974.00 in Transam Short Term Bond on October 25, 2024 and sell it today you would earn a total of 6.00 from holding Transam Short Term Bond or generate 0.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Transam Short Term Bond vs. Franklin Federal Tax Free
Performance |
| Timeline |
| Transam Short Term |
| Franklin Federal Tax |
Transam Short and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transam Short and Franklin Federal
The main advantage of trading using opposite Transam Short and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transam Short 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.| Transam Short vs. Gmo High Yield | Transam Short vs. Barings High Yield | Transam Short vs. Alliancebernstein Bond | Transam Short vs. Siit High Yield |
| Franklin Federal vs. Fidelity Flex Servative | Franklin Federal vs. Alpine Ultra Short | Franklin Federal vs. Transam Short Term Bond | Franklin Federal vs. Delaware Investments Ultrashort |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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