Correlation Between Templeton Global and Gmo Resources

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

By analyzing existing cross correlation between Templeton Global Smaller and Gmo Resources, you can compare the effects of market volatilities on Templeton Global and Gmo Resources 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 Global with a short position of Gmo Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Global and Gmo Resources.

Diversification Opportunities for Templeton Global and Gmo Resources

0.61

Correlation Coefficient

Templeton Global  Gmo Resources

Poor diversification

The 3 months correlation between Templeton and Gmo is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Global Smaller and Gmo Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Resources and Templeton Global 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 Global Smaller are associated (or correlated) with Gmo Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Resources has no effect on the direction of Templeton Global i.e., Templeton Global and Gmo Resources go up and down completely randomly.

Pair Corralation between Templeton Global and Gmo Resources

Assuming the 90 days horizon Templeton Global Smaller is expected to generate 0.64 times more return on investment than Gmo Resources. However, Templeton Global Smaller is 1.57 times less risky than Gmo Resources. It trades about -0.2 of its potential returns per unit of risk. Gmo Resources is currently generating about -0.27 per unit of risk. If you would invest  986.00  in Templeton Global Smaller on September 21, 2024 and sell it today you would lose (40.00) from holding Templeton Global Smaller or give up 4.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Templeton Global Smaller  vs.  Gmo Resources

Templeton Global Smaller

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gmo Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Resources 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.

Pair Trading with Templeton Global and Gmo Resources

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

The idea behind Templeton Global Smaller and Gmo Resources 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.