Correlation Between Templeton Dragon and First Trust

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

By analyzing existing cross correlation between Templeton Dragon Closed and First Trust Energy, you can compare the effects of market volatilities on Templeton Dragon and First Trust 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 Templeton Dragon with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Dragon and First Trust.

Diversification Opportunities for Templeton Dragon and First Trust

-0.39

Correlation Coefficient

Templeton Dragon  First Trust

Very good diversification

The 3 months correlation between Templeton and First is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Dragon Closed and First Trust Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Energy and Templeton Dragon 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 Templeton Dragon Closed are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Energy has no effect on the direction of Templeton Dragon i.e., Templeton Dragon and First Trust go up and down completely randomly.

Pair Corralation between Templeton Dragon and First Trust

If you would invest  790.00  in Templeton Dragon Closed on September 26, 2024 and sell it today you would earn a total of  87.00  from holding Templeton Dragon Closed or generate 11.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.8%
Values	Daily Returns

Templeton Dragon Closed  vs.  First Trust Energy

Templeton Dragon Closed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Templeton Dragon Closed has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable fundamental indicators, Templeton Dragon is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

First Trust Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Energy has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Templeton Dragon and First Trust

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

The idea behind Templeton Dragon Closed and First Trust Energy 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.