Correlation Between Alphabet and Templeton Emerging

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

By analyzing existing cross correlation between Alphabet Inc Class C and Templeton Emerging Markets, you can compare the effects of market volatilities on Alphabet and Templeton Emerging 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 Alphabet with a short position of Templeton Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Templeton Emerging.

Diversification Opportunities for Alphabet and Templeton Emerging

-0.3

Correlation Coefficient

Alphabet  Templeton Emerging

Very good diversification

The 3 months correlation between Alphabet and Templeton is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Templeton Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Emerging and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Templeton Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Emerging has no effect on the direction of Alphabet i.e., Alphabet and Templeton Emerging go up and down completely randomly.

Pair Corralation between Alphabet and Templeton Emerging

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.66 times more return on investment than Templeton Emerging. However, Alphabet is 1.66 times more volatile than Templeton Emerging Markets. It trades about 0.08 of its potential returns per unit of risk. Templeton Emerging Markets is currently generating about 0.05 per unit of risk. If you would invest  9,620  in Alphabet Inc Class C on December 4, 2024 and sell it today you would earn a total of  7,641  from holding Alphabet Inc Class C or generate 79.43% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Templeton Emerging Markets

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Alphabet is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Templeton Emerging

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Templeton Emerging Markets are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable primary indicators, Templeton Emerging is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alphabet and Templeton Emerging

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

The idea behind Alphabet Inc Class C and Templeton Emerging Markets 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.