Correlation Between Vanguard Energy and Franklin Federal
Can any of the company-specific risk be diversified away by investing in both Vanguard Energy 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 Vanguard Energy and Franklin Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Energy Index and Franklin Federal Tax Free, you can compare the effects of market volatilities on Vanguard Energy 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 Vanguard Energy with a short position of Franklin Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Energy and Franklin Federal.
Diversification Opportunities for Vanguard Energy and Franklin Federal
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Vanguard and Franklin is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Energy Index 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 Vanguard Energy 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 Vanguard Energy Index 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 Vanguard Energy i.e., Vanguard Energy and Franklin Federal go up and down completely randomly.
Pair Corralation between Vanguard Energy and Franklin Federal
Assuming the 90 days horizon Vanguard Energy Index is expected to generate 4.55 times more return on investment than Franklin Federal. However, Vanguard Energy is 4.55 times more volatile than Franklin Federal Tax Free. It trades about 0.0 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 6,187 in Vanguard Energy Index on November 4, 2024 and sell it today you would lose (12.00) from holding Vanguard Energy Index or give up 0.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Vanguard Energy Index vs. Franklin Federal Tax Free
Performance |
| Timeline |
| Vanguard Energy Index |
| Franklin Federal Tax |
Vanguard Energy and Franklin Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Energy and Franklin Federal
The main advantage of trading using opposite Vanguard Energy and Franklin Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Energy 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.| Vanguard Energy vs. Vanguard Financials Index | Vanguard Energy vs. Vanguard Utilities Index | Vanguard Energy vs. Vanguard Materials Index | Vanguard Energy vs. Vanguard Sumer Staples |
| Franklin Federal vs. Gmo Quality Fund | Franklin Federal vs. Tfa Alphagen Growth | Franklin Federal vs. Eip Growth And | Franklin Federal vs. Vanguard Growth And |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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