Correlation Between California Bond and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both California Bond and Franklin Lifesmart 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 California Bond and Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Bond Fund and Franklin Lifesmart 2045, you can compare the effects of market volatilities on California Bond and Franklin Lifesmart 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 California Bond with a short position of Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Franklin Lifesmart.
Diversification Opportunities for California Bond and Franklin Lifesmart
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between California and Franklin is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Franklin Lifesmart 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2045 and California Bond 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 California Bond Fund are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2045 has no effect on the direction of California Bond i.e., California Bond and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between California Bond and Franklin Lifesmart
Assuming the 90 days horizon California Bond Fund is expected to under-perform the Franklin Lifesmart. But the mutual fund apears to be less risky and, when comparing its historical volatility, California Bond Fund is 2.33 times less risky than Franklin Lifesmart. The mutual fund trades about -0.28 of its potential returns per unit of risk. The Franklin Lifesmart 2045 is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 1,542 in Franklin Lifesmart 2045 on September 26, 2024 and sell it today you would lose (9.00) from holding Franklin Lifesmart 2045 or give up 0.58% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.45% |
Values | Daily Returns |
California Bond Fund vs. Franklin Lifesmart 2045
Performance |
Timeline |
California Bond |
Franklin Lifesmart 2045 |
California Bond and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with California Bond and Franklin Lifesmart
The main advantage of trading using opposite California Bond and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Franklin Lifesmart 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 Lifesmart will offset losses from the drop in Franklin Lifesmart's long position.California Bond vs. Income Fund Income | California Bond vs. Usaa Nasdaq 100 | California Bond vs. Victory Diversified Stock | California Bond vs. Intermediate Term Bond Fund |
Franklin Lifesmart vs. Ridgeworth Seix Government | Franklin Lifesmart vs. Aig Government Money | Franklin Lifesmart vs. Virtus Seix Government | Franklin Lifesmart vs. Short Term Government Fund |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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