Correlation Between Franklin California and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Franklin California 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 Franklin California and Franklin Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin California Tax Free and Franklin Mutual Beacon, you can compare the effects of market volatilities on Franklin California 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 Franklin California with a short position of Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin California and Franklin Mutual.
Diversification Opportunities for Franklin California and Franklin Mutual
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franklin and Franklin is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Franklin California Tax Free and Franklin Mutual Beacon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Beacon and Franklin California 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 California 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 Beacon has no effect on the direction of Franklin California i.e., Franklin California and Franklin Mutual go up and down completely randomly.
Pair Corralation between Franklin California and Franklin Mutual
Assuming the 90 days horizon Franklin California Tax Free is expected to generate 0.31 times more return on investment than Franklin Mutual. However, Franklin California Tax Free is 3.18 times less risky than Franklin Mutual. It trades about -0.06 of its potential returns per unit of risk. Franklin Mutual Beacon is currently generating about -0.03 per unit of risk. If you would invest 691.00 in Franklin California Tax Free on December 2, 2024 and sell it today you would lose (6.00) from holding Franklin California Tax Free or give up 0.87% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Franklin California Tax Free vs. Franklin Mutual Beacon
Performance |
Timeline |
Franklin California Tax |
Franklin Mutual Beacon |
Franklin California and Franklin Mutual Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Franklin California and Franklin Mutual
The main advantage of trading using opposite Franklin California and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin California 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.Franklin California vs. Schwab Treasury Inflation | Franklin California vs. Short Duration Inflation | Franklin California vs. Inflation Linked Fixed Income | Franklin California vs. Ab Bond Inflation |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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