Correlation Between Europac International and Templeton Global

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

By analyzing existing cross correlation between Europac International Bond and Templeton Global Bond, you can compare the effects of market volatilities on Europac International and Templeton Global 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 Europac International with a short position of Templeton Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europac International and Templeton Global.

Diversification Opportunities for Europac International and Templeton Global

0.94

Correlation Coefficient

Europac International  Templeton Global

Almost no diversification

The 3 months correlation between Europac and Templeton is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Europac International Bond and Templeton Global Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Global Bond and Europac International 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 Europac International Bond are associated (or correlated) with Templeton Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Global Bond has no effect on the direction of Europac International i.e., Europac International and Templeton Global go up and down completely randomly.

Pair Corralation between Europac International and Templeton Global

Assuming the 90 days horizon Europac International is expected to generate 1.08 times less return on investment than Templeton Global. But when comparing it to its historical volatility, Europac International Bond is 1.38 times less risky than Templeton Global. It trades about 0.22 of its potential returns per unit of risk. Templeton Global Bond is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  644.00  in Templeton Global Bond on December 30, 2024 and sell it today you would earn a total of  29.00  from holding Templeton Global Bond or generate 4.5% return on investment over 90 days.

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

Europac International Bond  vs.  Templeton Global Bond

Europac International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Europac International Bond are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Europac International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Templeton Global Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Templeton Global Bond are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Templeton Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Europac International and Templeton Global

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

The idea behind Europac International Bond and Templeton Global Bond 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.