Correlation Between Templeton Global and Western Asset

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

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

Diversification Opportunities for Templeton Global and Western Asset

0.45

Correlation Coefficient

Templeton Global  Western Asset

Very weak diversification

The 3 months correlation between Templeton and Western is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Global Income and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Templeton Global 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 Templeton Global Income are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of Templeton Global i.e., Templeton Global and Western Asset go up and down completely randomly.

Pair Corralation between Templeton Global and Western Asset

Considering the 90-day investment horizon Templeton Global is expected to generate 1.37 times less return on investment than Western Asset. In addition to that, Templeton Global is 1.31 times more volatile than Western Asset High. It trades about 0.03 of its total potential returns per unit of risk. Western Asset High is currently generating about 0.05 per unit of volatility. If you would invest  1,038  in Western Asset High on September 20, 2024 and sell it today you would earn a total of  157.00  from holding Western Asset High or generate 15.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	28.48%
Values	Daily Returns

Templeton Global Income  vs.  Western Asset High

Templeton Global Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Templeton Global Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy forward indicators, Templeton Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Western Asset High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset High has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Templeton Global and Western Asset

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

The idea behind Templeton Global Income and Western Asset High 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.