Correlation Between Tax Managed and Templeton Growth

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

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

Diversification Opportunities for Tax Managed and Templeton Growth

0.38

Correlation Coefficient

Tax Managed  Templeton Growth

Weak diversification

The 3 months correlation between Tax and Templeton is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Large Cap and Templeton Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Growth and Tax Managed 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 Tax Managed Large Cap are associated (or correlated) with Templeton Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Growth has no effect on the direction of Tax Managed i.e., Tax Managed and Templeton Growth go up and down completely randomly.

Pair Corralation between Tax Managed and Templeton Growth

Assuming the 90 days horizon Tax Managed Large Cap is expected to under-perform the Templeton Growth. In addition to that, Tax Managed is 1.13 times more volatile than Templeton Growth Fund. It trades about -0.1 of its total potential returns per unit of risk. Templeton Growth Fund is currently generating about 0.04 per unit of volatility. If you would invest  2,618  in Templeton Growth Fund on December 24, 2024 and sell it today you would earn a total of  42.00  from holding Templeton Growth Fund or generate 1.6% return on investment over 90 days.

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

Tax Managed Large Cap  vs.  Templeton Growth Fund

Tax Managed Large

Risk-Adjusted Performance

Very Weak

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

Templeton Growth

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Templeton Growth Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Templeton Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tax Managed and Templeton Growth

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

The idea behind Tax Managed Large Cap and Templeton Growth 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..