Correlation Between Franklin and Columbia Limited

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

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

Diversification Opportunities for Franklin and Columbia Limited

0.0

Correlation Coefficient

Franklin  Columbia Limited

Pay attention - limited upside

The 3 months correlation between Franklin and Columbia is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Government Money and Columbia Limited Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Limited Duration and Franklin 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 Government Money are associated (or correlated) with Columbia Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Limited Duration has no effect on the direction of Franklin i.e., Franklin and Columbia Limited go up and down completely randomly.

Pair Corralation between Franklin and Columbia Limited

Assuming the 90 days horizon Franklin is expected to generate 1.12 times less return on investment than Columbia Limited. But when comparing it to its historical volatility, Franklin Government Money is 1.28 times less risky than Columbia Limited. It trades about 0.13 of its potential returns per unit of risk. Columbia Limited Duration is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  942.00  in Columbia Limited Duration on October 9, 2024 and sell it today you would earn a total of  39.00  from holding Columbia Limited Duration or generate 4.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	89.07%
Values	Daily Returns

Franklin Government Money  vs.  Columbia Limited Duration

Franklin Government Money

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Limited Duration

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Franklin and Columbia Limited

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

The idea behind Franklin Government Money and Columbia Limited Duration 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.