Correlation Between Western Asset and Franklin California
Can any of the company-specific risk be diversified away by investing in both Western Asset and Franklin California 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 Western Asset and Franklin California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Total and Franklin California Tax Free, you can compare the effects of market volatilities on Western Asset and Franklin California 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 Western Asset with a short position of Franklin California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Franklin California.
Diversification Opportunities for Western Asset and Franklin California
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Franklin is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Total and Franklin California Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin California Tax and Western Asset 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 Western Asset Total are associated (or correlated) with Franklin California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin California Tax has no effect on the direction of Western Asset i.e., Western Asset and Franklin California go up and down completely randomly.
Pair Corralation between Western Asset and Franklin California
Assuming the 90 days horizon Western Asset is expected to generate 1.16 times less return on investment than Franklin California. But when comparing it to its historical volatility, Western Asset Total is 1.72 times less risky than Franklin California. It trades about 0.2 of its potential returns per unit of risk. Franklin California Tax Free is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 684.00 in Franklin California Tax Free on August 29, 2024 and sell it today you would earn a total of 7.00 from holding Franklin California Tax Free or generate 1.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Total vs. Franklin California Tax Free
Performance |
| Timeline |
| Western Asset Total |
| Franklin California Tax |
Western Asset and Franklin California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Franklin California
The main advantage of trading using opposite Western Asset and Franklin California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Franklin California 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 California will offset losses from the drop in Franklin California's long position.| Western Asset vs. Boston Partners Small | Western Asset vs. Ultramid Cap Profund Ultramid Cap | Western Asset vs. Great West Loomis Sayles | Western Asset vs. American Century Etf |
| Franklin California vs. Angel Oak Financial | Franklin California vs. Artisan High Income | Franklin California vs. Blrc Sgy Mnp | Franklin California vs. Prudential Jennison Financial |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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