Correlation Between VanEck CEF and Franklin Liberty
Can any of the company-specific risk be diversified away by investing in both VanEck CEF and Franklin Liberty 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 VanEck CEF and Franklin Liberty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck CEF Municipal and Franklin Liberty Federal, you can compare the effects of market volatilities on VanEck CEF and Franklin Liberty 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 VanEck CEF with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck CEF and Franklin Liberty.
Diversification Opportunities for VanEck CEF and Franklin Liberty
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VanEck and Franklin is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding VanEck CEF Municipal and Franklin Liberty Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Federal and VanEck CEF 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 VanEck CEF Municipal are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Federal has no effect on the direction of VanEck CEF i.e., VanEck CEF and Franklin Liberty go up and down completely randomly.
Pair Corralation between VanEck CEF and Franklin Liberty
Given the investment horizon of 90 days VanEck CEF Municipal is expected to generate 1.42 times more return on investment than Franklin Liberty. However, VanEck CEF is 1.42 times more volatile than Franklin Liberty Federal. It trades about 0.2 of its potential returns per unit of risk. Franklin Liberty Federal is currently generating about 0.19 per unit of risk. If you would invest 2,235 in VanEck CEF Municipal on September 1, 2024 and sell it today you would earn a total of 55.00 from holding VanEck CEF Municipal or generate 2.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck CEF Municipal vs. Franklin Liberty Federal
Performance |
| Timeline |
| VanEck CEF Municipal |
| Franklin Liberty Federal |
VanEck CEF and Franklin Liberty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck CEF and Franklin Liberty
The main advantage of trading using opposite VanEck CEF and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck CEF position performs unexpectedly, Franklin Liberty 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 Liberty will offset losses from the drop in Franklin Liberty's long position.| VanEck CEF vs. Franklin Liberty Federal | VanEck CEF vs. Hartford Municipal Opportunities | VanEck CEF vs. IQ MacKay Municipal | VanEck CEF vs. First Trust Municipal |
| Franklin Liberty vs. Franklin Liberty Intermediate | Franklin Liberty vs. IQ MacKay Municipal | Franklin Liberty vs. Xtrackers Municipal Infrastructure | Franklin Liberty vs. Hartford Municipal Opportunities |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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