Correlation Between Government Securities and Franklin Government
Can any of the company-specific risk be diversified away by investing in both Government Securities and Franklin Government 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 Government Securities and Franklin Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Government Securities Fund and Franklin Government Money, you can compare the effects of market volatilities on Government Securities and Franklin Government 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 Government Securities with a short position of Franklin Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Securities and Franklin Government.
Diversification Opportunities for Government Securities and Franklin Government
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Government and Franklin is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Government Securities Fund and Franklin Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Government Money and Government Securities 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 Government Securities Fund are associated (or correlated) with Franklin Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Government Money has no effect on the direction of Government Securities i.e., Government Securities and Franklin Government go up and down completely randomly.
Pair Corralation between Government Securities and Franklin Government
Assuming the 90 days horizon Government Securities Fund is expected to under-perform the Franklin Government. In addition to that, Government Securities is 1.99 times more volatile than Franklin Government Money. It trades about -0.04 of its total potential returns per unit of risk. Franklin Government Money is currently generating about 0.13 per unit of volatility. If you would invest 99.00 in Franklin Government Money on September 3, 2024 and sell it today you would earn a total of 1.00 from holding Franklin Government Money or generate 1.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Government Securities Fund vs. Franklin Government Money
Performance |
| Timeline |
| Government Securities |
| Franklin Government Money |
Government Securities and Franklin Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Government Securities and Franklin Government
The main advantage of trading using opposite Government Securities and Franklin Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Government Securities position performs unexpectedly, Franklin Government 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 Government will offset losses from the drop in Franklin Government's long position.| Government Securities vs. Franklin Government Money | Government Securities vs. Dws Government Money | Government Securities vs. General Money Market | Government Securities vs. Ashmore Emerging Markets |
| Franklin Government vs. Vanguard Total Stock | Franklin Government vs. Vanguard 500 Index | Franklin Government vs. Vanguard Total Stock | Franklin Government vs. Vanguard Total Stock |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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