Correlation Between Franklin Federal and Calvert Short

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

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

Diversification Opportunities for Franklin Federal and Calvert Short

0.46

Correlation Coefficient

Franklin Federal  Calvert Short

Very weak diversification

The 3 months correlation between Franklin and Calvert is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Limited Term and Calvert Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Short Duration and Franklin Federal 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 Federal Limited Term are associated (or correlated) with Calvert Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Short Duration has no effect on the direction of Franklin Federal i.e., Franklin Federal and Calvert Short go up and down completely randomly.

Pair Corralation between Franklin Federal and Calvert Short

Assuming the 90 days horizon Franklin Federal Limited Term is expected to generate 1.05 times more return on investment than Calvert Short. However, Franklin Federal is 1.05 times more volatile than Calvert Short Duration. It trades about 0.23 of its potential returns per unit of risk. Calvert Short Duration is currently generating about 0.09 per unit of risk. If you would invest  1,025  in Franklin Federal Limited Term on August 30, 2024 and sell it today you would earn a total of  7.00  from holding Franklin Federal Limited Term or generate 0.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Franklin Federal Limited Term  vs.  Calvert Short Duration

Franklin Federal Lim

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Federal Limited Term are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Federal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Calvert Short Duration

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Short Duration are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Calvert 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 Federal and Calvert Short

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

The idea behind Franklin Federal Limited Term and Calvert Short 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..