Correlation Between Vanguard Intermediate-ter and Franklin

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

By analyzing existing cross correlation between Vanguard Intermediate Term Porate and Franklin Government Money, you can compare the effects of market volatilities on Vanguard Intermediate-ter and Franklin 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 Vanguard Intermediate-ter with a short position of Franklin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate-ter and Franklin.

Diversification Opportunities for Vanguard Intermediate-ter and Franklin

-0.65

Correlation Coefficient

Vanguard Intermediate-ter  Franklin

Excellent diversification

The 3 months correlation between Vanguard and Franklin is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Por and Franklin Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Government Money and Vanguard Intermediate-ter 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 Vanguard Intermediate Term Porate are associated (or correlated) with Franklin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Government Money has no effect on the direction of Vanguard Intermediate-ter i.e., Vanguard Intermediate-ter and Franklin go up and down completely randomly.

Pair Corralation between Vanguard Intermediate-ter and Franklin

Assuming the 90 days horizon Vanguard Intermediate Term Porate is expected to under-perform the Franklin. In addition to that, Vanguard Intermediate-ter is 2.36 times more volatile than Franklin Government Money. It trades about -0.02 of its total potential returns per unit of risk. Franklin Government Money is currently generating about 0.13 per unit of volatility. If you would invest  99.00  in Franklin Government Money on August 31, 2024 and sell it today you would earn a total of  1.00  from holding Franklin Government Money or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Vanguard Intermediate Term Por  vs.  Franklin Government Money

Vanguard Intermediate-ter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Intermediate Term Porate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Vanguard Intermediate-ter is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Government Money

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Government Money are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Intermediate-ter and Franklin

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

The idea behind Vanguard Intermediate Term Porate and Franklin Government Money 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.