Correlation Between Franklin Government and Transam Short

Can any of the company-specific risk be diversified away by investing in both Franklin Government and Transam Short 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 Government and Transam Short 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 Transam Short Term Bond, you can compare the effects of market volatilities on Franklin Government and Transam Short 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 Government with a short position of Transam Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Government and Transam Short.

Diversification Opportunities for Franklin Government and Transam Short

0.0

Correlation Coefficient

Franklin Government  Transam Short

Pay attention - limited upside

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

Pair Corralation between Franklin Government and Transam Short

If you would invest  967.00  in Transam Short Term Bond on December 22, 2024 and sell it today you would earn a total of  18.00  from holding Transam Short Term Bond or generate 1.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Franklin Government Money  vs.  Transam Short Term Bond

Franklin Government Money

Risk-Adjusted Performance

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 Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transam Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transam Short Term Bond are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transam Short 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 Government and Transam Short

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

The idea behind Franklin Government Money and Transam Short Term 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.