Correlation Between Columbia Tax and Franklin High

Can any of the company-specific risk be diversified away by investing in both Columbia Tax and Franklin High 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 Columbia Tax and Franklin High into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Columbia Tax Exempt Fund and Franklin High Income, you can compare the effects of market volatilities on Columbia Tax and Franklin High 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 Columbia Tax with a short position of Franklin High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Tax and Franklin High.

Diversification Opportunities for Columbia Tax and Franklin High

0.49

Correlation Coefficient

Columbia Tax  Franklin High

Very weak diversification

The 3 months correlation between Columbia and Franklin is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Tax Exempt Fund and Franklin High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin High Income and Columbia Tax 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 Columbia Tax Exempt Fund are associated (or correlated) with Franklin High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin High Income has no effect on the direction of Columbia Tax i.e., Columbia Tax and Franklin High go up and down completely randomly.

Pair Corralation between Columbia Tax and Franklin High

Assuming the 90 days horizon Columbia Tax is expected to generate 95.67 times less return on investment than Franklin High. In addition to that, Columbia Tax is 1.04 times more volatile than Franklin High Income. It trades about 0.0 of its total potential returns per unit of risk. Franklin High Income is currently generating about 0.13 per unit of volatility. If you would invest  175.00  in Franklin High Income on September 18, 2024 and sell it today you would earn a total of  1.00  from holding Franklin High Income or generate 0.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Columbia Tax Exempt Fund  vs.  Franklin High Income

Columbia Tax Exempt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Tax Exempt Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Columbia Tax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin High Income

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin High Income are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Franklin High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Columbia Tax and Franklin High

The main advantage of trading using opposite Columbia Tax and Franklin High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Tax position performs unexpectedly, Franklin High 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 High will offset losses from the drop in Franklin High's long position.

The idea behind Columbia Tax Exempt Fund and Franklin High Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.