Correlation Between Federated Pennsylvania and Templeton Growth

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

By analyzing existing cross correlation between Federated Pennsylvania Municipal and Templeton Growth Fund, you can compare the effects of market volatilities on Federated Pennsylvania and Templeton Growth 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 Federated Pennsylvania with a short position of Templeton Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Pennsylvania and Templeton Growth.

Diversification Opportunities for Federated Pennsylvania and Templeton Growth

0.52

Correlation Coefficient

Federated Pennsylvania  Templeton Growth

Very weak diversification

The 3 months correlation between Federated and Templeton is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Federated Pennsylvania Municip and Templeton Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Growth and Federated Pennsylvania 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 Federated Pennsylvania Municipal are associated (or correlated) with Templeton Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Growth has no effect on the direction of Federated Pennsylvania i.e., Federated Pennsylvania and Templeton Growth go up and down completely randomly.

Pair Corralation between Federated Pennsylvania and Templeton Growth

Assuming the 90 days horizon Federated Pennsylvania Municipal is expected to under-perform the Templeton Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Federated Pennsylvania Municipal is 4.13 times less risky than Templeton Growth. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Templeton Growth Fund is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,577  in Templeton Growth Fund on December 31, 2024 and sell it today you would earn a total of  31.00  from holding Templeton Growth Fund or generate 1.2% return on investment over 90 days.

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

Federated Pennsylvania Municip  vs.  Templeton Growth Fund

Federated Pennsylvania

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Pennsylvania Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Federated Pennsylvania is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Templeton Growth

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Templeton Growth Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Templeton Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Federated Pennsylvania and Templeton Growth

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

The idea behind Federated Pennsylvania Municipal and Templeton Growth Fund 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.