Correlation Between Vela Large and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Vela Large 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 Vela Large and Franklin Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vela Large Cap and Franklin Federal Tax Free, you can compare the effects of market volatilities on Vela Large 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 Vela Large with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vela Large and Franklin Federal.
Diversification Opportunities for Vela Large and Franklin Federal
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Vela and Franklin is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vela Large Cap 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 Vela Large 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 Vela Large Cap 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 Vela Large i.e., Vela Large and Franklin Federal go up and down completely randomly.
Pair Corralation between Vela Large and Franklin Federal
Assuming the 90 days horizon Vela Large is expected to generate 3.47 times less return on investment than Franklin Federal. In addition to that, Vela Large is 2.83 times more volatile than Franklin Federal Tax Free. It trades about 0.04 of its total potential returns per unit of risk. Franklin Federal Tax Free is currently generating about 0.38 per unit of volatility. If you would invest 1,090 in Franklin Federal Tax Free on September 13, 2024 and sell it today you would earn a total of 11.00 from holding Franklin Federal Tax Free or generate 1.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vela Large Cap vs. Franklin Federal Tax Free
Performance |
| Timeline |
| Vela Large Cap |
| Franklin Federal Tax |
Vela Large and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vela Large and Franklin Federal
The main advantage of trading using opposite Vela Large and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vela Large 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.| Vela Large vs. Pgim Jennison Technology | Vela Large vs. Janus Global Technology | Vela Large vs. Vanguard Information Technology | Vela Large vs. Allianzgi Technology Fund |
| Franklin Federal vs. Rationalpier 88 Convertible | Franklin Federal vs. Allianzgi Convertible Income | Franklin Federal vs. Calamos Dynamic Convertible |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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