Correlation Between Tax Exempt and Franklin California

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Can any of the company-specific risk be diversified away by investing in both Tax Exempt and Franklin California 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 Tax Exempt and Franklin California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Exempt Fund Of and Franklin California Tax Free, you can compare the effects of market volatilities on Tax Exempt and Franklin California 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 Tax Exempt with a short position of Franklin California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax Exempt and Franklin California.

Diversification Opportunities for Tax Exempt and Franklin California

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Tax and Franklin is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding TAX-EXEMPT FUND OF and FRANKLIN CALIFORNIA TAX-FREE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin California and Tax Exempt 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 Tax Exempt Fund Of are associated (or correlated) with Franklin California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin California has no effect on the direction of Tax Exempt i.e., Tax Exempt and Franklin California go up and down completely randomly.

Pair Corralation between Tax Exempt and Franklin California

Assuming the 90 days horizon Tax Exempt is expected to generate 2.44 times less return on investment than Franklin California. But when comparing it to its historical volatility, Tax Exempt Fund Of is 1.66 times less risky than Franklin California. It trades about 0.05 of its potential returns per unit of risk. Franklin California Tax Free is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  684.00  in Franklin California Tax Free on December 29, 2023 and sell it today you would earn a total of  2.00  from holding Franklin California Tax Free or generate 0.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

TAX-EXEMPT FUND OF  vs.  FRANKLIN CALIFORNIA TAX-FREE

 Performance 
       Timeline  
Tax-exempt Fund 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

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

Tax Exempt and Franklin California Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tax Exempt and Franklin California

The main advantage of trading using opposite Tax Exempt and Franklin California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax Exempt position performs unexpectedly, Franklin California 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 California will offset losses from the drop in Franklin California's long position.
The idea behind Tax Exempt Fund Of and Franklin California Tax Free 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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