Correlation Between Franklin High and Georgia Tax-free

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Can any of the company-specific risk be diversified away by investing in both Franklin High and Georgia Tax-free 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 Franklin High and Georgia Tax-free into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin High Yield and Georgia Tax Free Bond, you can compare the effects of market volatilities on Franklin High and Georgia Tax-free 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 Franklin High with a short position of Georgia Tax-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin High and Georgia Tax-free.

Diversification Opportunities for Franklin High and Georgia Tax-free

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between Franklin and Georgia is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Franklin High Yield and Georgia Tax Free Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Georgia Tax Free and Franklin High 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 Franklin High Yield are associated (or correlated) with Georgia Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Georgia Tax Free has no effect on the direction of Franklin High i.e., Franklin High and Georgia Tax-free go up and down completely randomly.

Pair Corralation between Franklin High and Georgia Tax-free

Assuming the 90 days horizon Franklin High Yield is expected to under-perform the Georgia Tax-free. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin High Yield is 1.05 times less risky than Georgia Tax-free. The mutual fund trades about -0.42 of its potential returns per unit of risk. The Georgia Tax Free Bond is currently generating about -0.35 of returns per unit of risk over similar time horizon. If you would invest  1,110  in Georgia Tax Free Bond on October 9, 2024 and sell it today you would lose (21.00) from holding Georgia Tax Free Bond or give up 1.89% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Franklin High Yield  vs.  Georgia Tax Free Bond

 Performance 
       Timeline  
Franklin High Yield 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Franklin High Yield has generated negative risk-adjusted returns adding no value to fund investors. 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.
Georgia Tax Free 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Georgia Tax Free Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Georgia Tax-free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin High and Georgia Tax-free Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Franklin High and Georgia Tax-free

The main advantage of trading using opposite Franklin High and Georgia Tax-free positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin High position performs unexpectedly, Georgia Tax-free 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 Georgia Tax-free will offset losses from the drop in Georgia Tax-free's long position.
The idea behind Franklin High Yield and Georgia Tax Free Bond 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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