Correlation Between California Bond and Franklin Emerging
Can any of the company-specific risk be diversified away by investing in both California Bond and Franklin Emerging 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 California Bond and Franklin Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Bond Fund and Franklin Emerging Market, you can compare the effects of market volatilities on California Bond and Franklin Emerging 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 California Bond with a short position of Franklin Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Franklin Emerging.
Diversification Opportunities for California Bond and Franklin Emerging
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between California and Franklin is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Franklin Emerging Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Emerging Market and California Bond 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 California Bond Fund are associated (or correlated) with Franklin Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Emerging Market has no effect on the direction of California Bond i.e., California Bond and Franklin Emerging go up and down completely randomly.
Pair Corralation between California Bond and Franklin Emerging
Assuming the 90 days horizon California Bond is expected to generate 4.89 times less return on investment than Franklin Emerging. In addition to that, California Bond is 1.37 times more volatile than Franklin Emerging Market. It trades about 0.03 of its total potential returns per unit of risk. Franklin Emerging Market is currently generating about 0.23 per unit of volatility. If you would invest 1,178 in Franklin Emerging Market on August 23, 2024 and sell it today you would earn a total of 35.00 from holding Franklin Emerging Market or generate 2.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Bond Fund vs. Franklin Emerging Market
Performance |
| Timeline |
| California Bond |
| Franklin Emerging Market |
California Bond and Franklin Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Franklin Emerging
The main advantage of trading using opposite California Bond and Franklin Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Franklin Emerging 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 Emerging will offset losses from the drop in Franklin Emerging's long position.| California Bond vs. Vanguard California Long Term | California Bond vs. Vanguard California Long Term | California Bond vs. Tax Exempt Fund Of | California Bond vs. Tax Exempt Fund Of |
| Franklin Emerging vs. California Bond Fund | Franklin Emerging vs. Multisector Bond Sma | Franklin Emerging vs. Dws Communications | Franklin Emerging vs. Transamerica Intermediate Muni |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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