Correlation Between Franklin Ohio and Franklin Mutual

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

Diversification Opportunities for Franklin Ohio and Franklin Mutual

0.45

Correlation Coefficient

Franklin Ohio  Franklin Mutual

Very weak diversification

The 3 months correlation between Franklin and Franklin is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Ohio 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 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 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 Ohio i.e., Franklin Ohio and Franklin Mutual go up and down completely randomly.

Pair Corralation between Franklin Ohio and Franklin Mutual

Assuming the 90 days horizon Franklin Ohio Tax Free is expected to under-perform the Franklin Mutual. But the mutual fund apears to be less risky and, when comparing its historical volatility, Franklin Ohio Tax Free is 2.81 times less risky than Franklin Mutual. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Franklin Mutual Beacon is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,558  in Franklin Mutual Beacon on December 30, 2024 and sell it today you would earn a total of  95.00  from holding Franklin Mutual Beacon or generate 6.1% return on investment over 90 days.

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

Franklin Ohio Tax Free  vs.  Franklin Mutual Beacon

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.

Franklin Mutual Beacon

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Mutual Beacon are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Franklin Mutual 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 Franklin Mutual

The main advantage of trading using opposite Franklin Ohio and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Ohio 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.

The idea behind Franklin Ohio Tax Free and Franklin Mutual Beacon 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.