Correlation Between Money Market and Franklin Income

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

By analyzing existing cross correlation between Money Market Obligations and Franklin Income Fund, you can compare the effects of market volatilities on Money Market and Franklin Income 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 Money Market with a short position of Franklin Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Money Market and Franklin Income.

Diversification Opportunities for Money Market and Franklin Income

0.0

Correlation Coefficient

Money Market  Franklin Income

Pay attention - limited upside

The 3 months correlation between Money and Franklin is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Money Market Obligations and Franklin Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Income and Money Market 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 Money Market Obligations are associated (or correlated) with Franklin Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Income has no effect on the direction of Money Market i.e., Money Market and Franklin Income go up and down completely randomly.

Pair Corralation between Money Market and Franklin Income

Assuming the 90 days horizon Money Market is expected to generate 1.78 times less return on investment than Franklin Income. But when comparing it to its historical volatility, Money Market Obligations is 2.71 times less risky than Franklin Income. It trades about 0.13 of its potential returns per unit of risk. Franklin Income Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  217.00  in Franklin Income Fund on October 7, 2024 and sell it today you would earn a total of  16.00  from holding Franklin Income Fund or generate 7.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Money Market Obligations  vs.  Franklin Income Fund

Money Market Obligations

Risk-Adjusted Performance

0 of 100

Very Weak

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

Franklin Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Money Market and Franklin Income

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

The idea behind Money Market Obligations and Franklin Income 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.