Correlation Between Franklin Federal and Robinson Tax

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

By analyzing existing cross correlation between Franklin Federal Tax Free and Robinson Tax Advantaged, you can compare the effects of market volatilities on Franklin Federal and Robinson Tax 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 Robinson Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin Federal and Robinson Tax.

Diversification Opportunities for Franklin Federal and Robinson Tax

0.73

Correlation Coefficient

Franklin Federal  Robinson Tax

Poor diversification

The 3 months correlation between Franklin and Robinson is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Federal Tax Free and Robinson Tax Advantaged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Robinson Tax Advantaged 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 Tax Free are associated (or correlated) with Robinson Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Robinson Tax Advantaged has no effect on the direction of Franklin Federal i.e., Franklin Federal and Robinson Tax go up and down completely randomly.

Pair Corralation between Franklin Federal and Robinson Tax

Assuming the 90 days horizon Franklin Federal is expected to generate 1.28 times less return on investment than Robinson Tax. But when comparing it to its historical volatility, Franklin Federal Tax Free is 1.37 times less risky than Robinson Tax. It trades about 0.22 of its potential returns per unit of risk. Robinson Tax Advantaged is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  889.00  in Robinson Tax Advantaged on August 31, 2024 and sell it today you would earn a total of  19.00  from holding Robinson Tax Advantaged or generate 2.14% return on investment over 90 days.

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

Franklin Federal Tax Free  vs.  Robinson Tax Advantaged

Franklin Federal Tax

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Federal Tax Free are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Federal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Robinson Tax Advantaged

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Robinson Tax Advantaged are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Robinson Tax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franklin Federal and Robinson Tax

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

The idea behind Franklin Federal Tax Free and Robinson Tax Advantaged 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.