Correlation Between Franklin Federal and Dreyfus Government
Can any of the company-specific risk be diversified away by investing in both Franklin Federal and Dreyfus Government 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 Federal and Dreyfus Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franklin Federal Limited Term and Dreyfus Government Cash, you can compare the effects of market volatilities on Franklin Federal and Dreyfus Government 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 Federal with a short position of Dreyfus Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Dreyfus Government.
Diversification Opportunities for Franklin Federal and Dreyfus Government
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Franklin and Dreyfus is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Limited Term and Dreyfus Government Cash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Government Cash and Franklin Federal 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 Federal Limited Term are associated (or correlated) with Dreyfus Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Government Cash has no effect on the direction of Franklin Federal i.e., Franklin Federal and Dreyfus Government go up and down completely randomly.
Pair Corralation between Franklin Federal and Dreyfus Government
Assuming the 90 days horizon Franklin Federal is expected to generate 2.04 times less return on investment than Dreyfus Government. But when comparing it to its historical volatility, Franklin Federal Limited Term is 11.58 times less risky than Dreyfus Government. It trades about 0.12 of its potential returns per unit of risk. Dreyfus Government Cash is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 91.00 in Dreyfus Government Cash on September 29, 2024 and sell it today you would earn a total of 9.00 from holding Dreyfus Government Cash or generate 9.89% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 98.02% |
Values | Daily Returns |
Franklin Federal Limited Term vs. Dreyfus Government Cash
Performance |
Timeline |
Franklin Federal Lim |
Dreyfus Government Cash |
Franklin Federal and Dreyfus Government Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Franklin Federal and Dreyfus Government
The main advantage of trading using opposite Franklin Federal and Dreyfus Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Federal position performs unexpectedly, Dreyfus Government 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 Dreyfus Government will offset losses from the drop in Dreyfus Government's long position.Franklin Federal vs. Tfa Alphagen Growth | Franklin Federal vs. Small Pany Growth | Franklin Federal vs. Franklin Growth Opportunities | Franklin Federal vs. T Rowe Price |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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