Correlation Between Templeton Global and MFS Charter

Can any of the company-specific risk be diversified away by investing in both Templeton Global and MFS Charter 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 MFS Charter 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 MFS Charter Income, you can compare the effects of market volatilities on Templeton Global and MFS Charter 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 MFS Charter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Global and MFS Charter.

Diversification Opportunities for Templeton Global and MFS Charter

0.22

Correlation Coefficient

Templeton Global  MFS Charter

Modest diversification

The 3 months correlation between Templeton and MFS is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Global Income and MFS Charter Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Charter Income 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 MFS Charter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Charter Income has no effect on the direction of Templeton Global i.e., Templeton Global and MFS Charter go up and down completely randomly.

Pair Corralation between Templeton Global and MFS Charter

Considering the 90-day investment horizon Templeton Global is expected to generate 1.98 times less return on investment than MFS Charter. But when comparing it to its historical volatility, Templeton Global Income is 1.24 times less risky than MFS Charter. It trades about 0.03 of its potential returns per unit of risk. MFS Charter Income is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  517.00  in MFS Charter Income on September 20, 2024 and sell it today you would earn a total of  109.00  from holding MFS Charter Income or generate 21.08% return on investment over 90 days.

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

Templeton Global Income  vs.  MFS Charter Income

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.

MFS Charter Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS Charter Income has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, MFS Charter is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Templeton Global and MFS Charter

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

The idea behind Templeton Global Income and MFS Charter Income 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.