Correlation Between Nuance Mid and Templeton Foreign

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

By analyzing existing cross correlation between Nuance Mid Cap and Templeton Foreign Fund, you can compare the effects of market volatilities on Nuance Mid and Templeton Foreign 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 Nuance Mid with a short position of Templeton Foreign. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuance Mid and Templeton Foreign.

Diversification Opportunities for Nuance Mid and Templeton Foreign

-0.48

Correlation Coefficient

Nuance Mid  Templeton Foreign

Very good diversification

The 3 months correlation between Nuance and Templeton is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Nuance Mid Cap and Templeton Foreign Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Foreign and Nuance Mid 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 Nuance Mid Cap are associated (or correlated) with Templeton Foreign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Foreign has no effect on the direction of Nuance Mid i.e., Nuance Mid and Templeton Foreign go up and down completely randomly.

Pair Corralation between Nuance Mid and Templeton Foreign

Assuming the 90 days horizon Nuance Mid Cap is expected to under-perform the Templeton Foreign. But the mutual fund apears to be less risky and, when comparing its historical volatility, Nuance Mid Cap is 1.09 times less risky than Templeton Foreign. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Templeton Foreign Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  769.00  in Templeton Foreign Fund on December 30, 2024 and sell it today you would earn a total of  73.00  from holding Templeton Foreign Fund or generate 9.49% return on investment over 90 days.

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

Nuance Mid Cap  vs.  Templeton Foreign Fund

Nuance Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuance Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Nuance Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Templeton Foreign

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Templeton Foreign Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Templeton Foreign may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nuance Mid and Templeton Foreign

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

The idea behind Nuance Mid Cap and Templeton Foreign Fund 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.