Correlation Between Clearbridge International and Templeton Developing

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

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

Diversification Opportunities for Clearbridge International and Templeton Developing

0.88

Correlation Coefficient

Clearbridge International  Templeton Developing

Very poor diversification

The 3 months correlation between Clearbridge and Templeton is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge International Valu and Templeton Developing Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Developing and Clearbridge International 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 Clearbridge International Value are associated (or correlated) with Templeton Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Developing has no effect on the direction of Clearbridge International i.e., Clearbridge International and Templeton Developing go up and down completely randomly.

Pair Corralation between Clearbridge International and Templeton Developing

Assuming the 90 days horizon Clearbridge International Value is expected to under-perform the Templeton Developing. In addition to that, Clearbridge International is 1.41 times more volatile than Templeton Developing Markets. It trades about -0.18 of its total potential returns per unit of risk. Templeton Developing Markets is currently generating about -0.14 per unit of volatility. If you would invest  1,958  in Templeton Developing Markets on September 26, 2024 and sell it today you would lose (39.00) from holding Templeton Developing Markets or give up 1.99% of portfolio value over 90 days.

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

Clearbridge International Valu  vs.  Templeton Developing Markets

Clearbridge International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clearbridge International Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Templeton Developing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Templeton Developing Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Clearbridge International and Templeton Developing

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

The idea behind Clearbridge International Value and Templeton Developing 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.