Correlation Between Franklin Lifesmart and National Tax
Can any of the company-specific risk be diversified away by investing in both Franklin Lifesmart and National Tax 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 Lifesmart and National Tax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Lifesmart 2045 and The National Tax Free, you can compare the effects of market volatilities on Franklin Lifesmart and National Tax 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 Lifesmart with a short position of National Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Lifesmart and National Tax.
Diversification Opportunities for Franklin Lifesmart and National Tax
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Franklin and National is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Lifesmart 2045 and The National Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Tax and Franklin Lifesmart 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 Lifesmart 2045 are associated (or correlated) with National Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Tax has no effect on the direction of Franklin Lifesmart i.e., Franklin Lifesmart and National Tax go up and down completely randomly.
Pair Corralation between Franklin Lifesmart and National Tax
Assuming the 90 days horizon Franklin Lifesmart 2045 is expected to generate 2.56 times more return on investment than National Tax. However, Franklin Lifesmart is 2.56 times more volatile than The National Tax Free. It trades about -0.01 of its potential returns per unit of risk. The National Tax Free is currently generating about -0.12 per unit of risk. If you would invest 1,682 in Franklin Lifesmart 2045 on September 30, 2024 and sell it today you would lose (11.00) from holding Franklin Lifesmart 2045 or give up 0.65% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Franklin Lifesmart 2045 vs. The National Tax Free
Performance |
Timeline |
Franklin Lifesmart 2045 |
National Tax |
Franklin Lifesmart and National Tax Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Franklin Lifesmart and National Tax
The main advantage of trading using opposite Franklin Lifesmart and National Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Lifesmart position performs unexpectedly, National Tax 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 National Tax will offset losses from the drop in National Tax's long position.Franklin Lifesmart vs. Guidemark Large Cap | ||
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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