Correlation Between The National and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both The National and Franklin Mutual 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 The National and Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The National Tax Free and Franklin Mutual European, you can compare the effects of market volatilities on The National and Franklin Mutual 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 The National with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and Franklin Mutual.
Diversification Opportunities for The National and Franklin Mutual
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between The and Franklin is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Franklin Mutual European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual European and The National 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 The National Tax Free are associated (or correlated) with Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual European has no effect on the direction of The National i.e., The National and Franklin Mutual go up and down completely randomly.
Pair Corralation between The National and Franklin Mutual
Assuming the 90 days horizon The National is expected to generate 3.21 times less return on investment than Franklin Mutual. But when comparing it to its historical volatility, The National Tax Free is 3.73 times less risky than Franklin Mutual. It trades about 0.09 of its potential returns per unit of risk. Franklin Mutual European is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,128 in Franklin Mutual European on December 2, 2024 and sell it today you would earn a total of 491.00 from holding Franklin Mutual European or generate 23.07% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
The National Tax Free vs. Franklin Mutual European
Performance |
Timeline |
National Tax |
Franklin Mutual European |
The National and Franklin Mutual Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with The National and Franklin Mutual
The main advantage of trading using opposite The National and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The National position performs unexpectedly, Franklin Mutual 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 Mutual will offset losses from the drop in Franklin Mutual's long position.The National vs. The Missouri Tax Free | The National vs. The Bond Fund | The National vs. High Yield Municipal Fund | The National vs. Fidelity Intermediate Municipal |
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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 Stocks Directory module to find actively traded stocks across global markets.
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