Correlation Between Franklin Necticut and Franklin Income

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

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

Diversification Opportunities for Franklin Necticut and Franklin Income

-0.13

Correlation Coefficient

Franklin Necticut  Franklin Income

Good diversification

The 3 months correlation between Franklin and Franklin is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Necticut Tax Free and Franklin Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Income and Franklin Necticut 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 Necticut Tax Free 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 Franklin Necticut i.e., Franklin Necticut and Franklin Income go up and down completely randomly.

Pair Corralation between Franklin Necticut and Franklin Income

Assuming the 90 days horizon Franklin Necticut is expected to generate 388.5 times less return on investment than Franklin Income. But when comparing it to its historical volatility, Franklin Necticut Tax Free is 1.79 times less risky than Franklin Income. It trades about 0.0 of its potential returns per unit of risk. Franklin Income is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  229.00  in Franklin Income on May 7, 2025 and sell it today you would earn a total of  11.00  from holding Franklin Income or generate 4.8% return on investment over 90 days.

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

Franklin Necticut Tax Free  vs.  Franklin Income

Franklin Necticut Tax

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Necticut Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin Necticut 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

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Income are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. 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 Franklin Necticut and Franklin Income

The main advantage of trading using opposite Franklin Necticut and Franklin Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Necticut 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 Franklin Necticut Tax Free and Franklin Income 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.