Correlation Between Schwab Treasury and Franklin Income

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

By analyzing existing cross correlation between Schwab Treasury Money and Franklin Income Fund, you can compare the effects of market volatilities on Schwab Treasury and Franklin Income 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 Schwab Treasury with a short position of Franklin Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schwab Treasury and Franklin Income.

Diversification Opportunities for Schwab Treasury and Franklin Income

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Correlation Coefficient

Schwab Treasury  Franklin Income

Pay attention - limited upside

The 3 months correlation between Schwab and Franklin is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Schwab Treasury Money and Franklin Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Income and Schwab Treasury 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 Schwab Treasury Money are associated (or correlated) with Franklin Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Income has no effect on the direction of Schwab Treasury i.e., Schwab Treasury and Franklin Income go up and down completely randomly.

Pair Corralation between Schwab Treasury and Franklin Income

Assuming the 90 days horizon Schwab Treasury is expected to generate 2.23 times less return on investment than Franklin Income. But when comparing it to its historical volatility, Schwab Treasury Money is 1.61 times less risky than Franklin Income. It trades about 0.09 of its potential returns per unit of risk. Franklin Income Fund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  209.00  in Franklin Income Fund on September 28, 2024 and sell it today you would earn a total of  25.00  from holding Franklin Income Fund or generate 11.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.89%
Values	Daily Returns

Schwab Treasury Money  vs.  Franklin Income Fund

Schwab Treasury Money

Risk-Adjusted Performance

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Very Weak

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

Franklin Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Schwab Treasury and Franklin Income

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

The idea behind Schwab Treasury Money and Franklin Income Fund 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.