Correlation Between Franklin Liberty and Avantis Core

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

By analyzing existing cross correlation between Franklin Liberty Intermediate and Avantis Core Municipal, you can compare the effects of market volatilities on Franklin Liberty and Avantis Core 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 Liberty with a short position of Avantis Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Liberty and Avantis Core.

Diversification Opportunities for Franklin Liberty and Avantis Core

0.91

Correlation Coefficient

Franklin Liberty  Avantis Core

Almost no diversification

The 3 months correlation between Franklin and Avantis is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Liberty Intermediate and Avantis Core Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Core Municipal and Franklin Liberty 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 Liberty Intermediate are associated (or correlated) with Avantis Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Core Municipal has no effect on the direction of Franklin Liberty i.e., Franklin Liberty and Avantis Core go up and down completely randomly.

Pair Corralation between Franklin Liberty and Avantis Core

Given the investment horizon of 90 days Franklin Liberty is expected to generate 1.25 times less return on investment than Avantis Core. In addition to that, Franklin Liberty is 1.12 times more volatile than Avantis Core Municipal. It trades about 0.07 of its total potential returns per unit of risk. Avantis Core Municipal is currently generating about 0.1 per unit of volatility. If you would invest  4,609  in Avantis Core Municipal on August 30, 2024 and sell it today you would earn a total of  75.00  from holding Avantis Core Municipal or generate 1.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Franklin Liberty Intermediate  vs.  Avantis Core Municipal

Franklin Liberty Int

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Liberty Intermediate are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Avantis Core Municipal

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Core Municipal are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Avantis Core is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Franklin Liberty and Avantis Core

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

The idea behind Franklin Liberty Intermediate and Avantis Core Municipal 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..