Correlation Between Columbia Minnesota and Franklin Minnesota

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

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

Diversification Opportunities for Columbia Minnesota and Franklin Minnesota

1.0

Correlation Coefficient

Columbia Minnesota  Franklin Minnesota

No risk reduction

The 3 months correlation between Columbia and Franklin is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Minnesota Tax Exempt and Franklin Minnesota Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Minnesota Tax and Columbia Minnesota 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 Columbia Minnesota Tax Exempt are associated (or correlated) with Franklin Minnesota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Minnesota Tax has no effect on the direction of Columbia Minnesota i.e., Columbia Minnesota and Franklin Minnesota go up and down completely randomly.

Pair Corralation between Columbia Minnesota and Franklin Minnesota

Assuming the 90 days horizon Columbia Minnesota is expected to generate 1.21 times less return on investment than Franklin Minnesota. In addition to that, Columbia Minnesota is 1.06 times more volatile than Franklin Minnesota Tax Free. It trades about 0.03 of its total potential returns per unit of risk. Franklin Minnesota Tax Free is currently generating about 0.04 per unit of volatility. If you would invest  1,132  in Franklin Minnesota Tax Free on September 13, 2024 and sell it today you would earn a total of  7.00  from holding Franklin Minnesota Tax Free or generate 0.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Columbia Minnesota Tax Exempt  vs.  Franklin Minnesota Tax Free

Columbia Minnesota Tax

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Minnesota Tax Exempt are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Columbia Minnesota is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Minnesota Tax

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Minnesota Tax Free are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Franklin Minnesota is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Columbia Minnesota and Franklin Minnesota

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

The idea behind Columbia Minnesota Tax Exempt and Franklin Minnesota 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.