Correlation Between Invesco Energy and Templeton Global

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Can any of the company-specific risk be diversified away by investing in both Invesco Energy 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 Invesco Energy and Templeton Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Energy Fund and Templeton Global Bond, you can compare the effects of market volatilities on Invesco Energy 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 Invesco Energy with a short position of Templeton Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Energy and Templeton Global.

Diversification Opportunities for Invesco Energy and Templeton Global

InvescoTempletonDiversified AwayInvescoTempletonDiversified Away100%
0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Invesco and Templeton is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Energy Fund 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 Invesco Energy 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 Invesco Energy Fund 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 Invesco Energy i.e., Invesco Energy and Templeton Global go up and down completely randomly.

Pair Corralation between Invesco Energy and Templeton Global

Assuming the 90 days horizon Invesco Energy Fund is expected to under-perform the Templeton Global. In addition to that, Invesco Energy is 2.26 times more volatile than Templeton Global Bond. It trades about -0.03 of its total potential returns per unit of risk. Templeton Global Bond is currently generating about 0.01 per unit of volatility. If you would invest  672.00  in Templeton Global Bond on November 24, 2024 and sell it today you would earn a total of  1.00  from holding Templeton Global Bond or generate 0.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Invesco Energy Fund  vs.  Templeton Global Bond

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-8-6-4-202
JavaScript chart by amCharts 3.21.15IEFCX TGBAX
       Timeline  
Invesco Energy 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Invesco Energy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Invesco Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2323.52424.52525.5
Templeton Global Bond 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Templeton Global Bond has generated negative risk-adjusted returns adding no value to fund investors. 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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb6.46.456.56.556.66.656.76.75

Invesco Energy and Templeton Global Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.69-1.26-0.83-0.4-0.010.350.781.211.642.07 0.51.01.5
JavaScript chart by amCharts 3.21.15IEFCX TGBAX
       Returns  

Pair Trading with Invesco Energy and Templeton Global

The main advantage of trading using opposite Invesco Energy and Templeton Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Energy 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 Invesco Energy Fund 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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