Correlation Between VanEck Short and Franklin Liberty

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

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

Diversification Opportunities for VanEck Short and Franklin Liberty

0.93

Correlation Coefficient

VanEck Short  Franklin Liberty

Almost no diversification

The 3 months correlation between VanEck and Franklin is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Short Muni and Franklin Liberty Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Int and VanEck Short 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 VanEck Short Muni are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Int has no effect on the direction of VanEck Short i.e., VanEck Short and Franklin Liberty go up and down completely randomly.

Pair Corralation between VanEck Short and Franklin Liberty

Considering the 90-day investment horizon VanEck Short is expected to generate 2.31 times less return on investment than Franklin Liberty. But when comparing it to its historical volatility, VanEck Short Muni is 2.0 times less risky than Franklin Liberty. It trades about 0.07 of its potential returns per unit of risk. Franklin Liberty Intermediate is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,167  in Franklin Liberty Intermediate on September 20, 2024 and sell it today you would earn a total of  280.00  from holding Franklin Liberty Intermediate or generate 12.92% return on investment over 90 days.

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

VanEck Short Muni  vs.  Franklin Liberty Intermediate

VanEck Short Muni

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Short Muni has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, VanEck Short is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Franklin Liberty Int

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Liberty Intermediate has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with VanEck Short and Franklin Liberty

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

The idea behind VanEck Short Muni and Franklin Liberty Intermediate 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.