Correlation Between Franklin Ohio and Vanguard Ohio

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

By analyzing existing cross correlation between Franklin Ohio Tax Free and Vanguard Ohio Long Term, you can compare the effects of market volatilities on Franklin Ohio and Vanguard Ohio 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 Ohio with a short position of Vanguard Ohio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Ohio and Vanguard Ohio.

Diversification Opportunities for Franklin Ohio and Vanguard Ohio

0.94

Correlation Coefficient

Franklin Ohio  Vanguard Ohio

Almost no diversification

The 3 months correlation between Franklin and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Ohio Tax Free and Vanguard Ohio Long Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Ohio Long and Franklin Ohio 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 Ohio Tax Free are associated (or correlated) with Vanguard Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Ohio Long has no effect on the direction of Franklin Ohio i.e., Franklin Ohio and Vanguard Ohio go up and down completely randomly.

Pair Corralation between Franklin Ohio and Vanguard Ohio

Assuming the 90 days horizon Franklin Ohio Tax Free is expected to under-perform the Vanguard Ohio. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin Ohio Tax Free is 1.17 times less risky than Vanguard Ohio. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Vanguard Ohio Long Term is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,179  in Vanguard Ohio Long Term on November 29, 2024 and sell it today you would lose (5.00) from holding Vanguard Ohio Long Term or give up 0.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Franklin Ohio Tax Free  vs.  Vanguard Ohio Long Term

Franklin Ohio Tax

Risk-Adjusted Performance

Very Weak

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

Vanguard Ohio Long

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Ohio Long Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Vanguard Ohio 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 Ohio and Vanguard Ohio

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

The idea behind Franklin Ohio Tax Free and Vanguard Ohio Long Term 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.