Correlation Between Templeton Emerging and R Co

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

By analyzing existing cross correlation between Templeton Emerging Mkt and R co Valor F, you can compare the effects of market volatilities on Templeton Emerging and R Co 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 Emerging with a short position of R Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Emerging and R Co.

Diversification Opportunities for Templeton Emerging and R Co

0.38

Correlation Coefficient

Templeton Emerging  R Co

Weak diversification

The 3 months correlation between Templeton and 0P00017SX2 is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Emerging Mkt and R co Valor F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on R co Valor and Templeton Emerging 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 Emerging Mkt are associated (or correlated) with R Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of R co Valor has no effect on the direction of Templeton Emerging i.e., Templeton Emerging and R Co go up and down completely randomly.

Pair Corralation between Templeton Emerging and R Co

Assuming the 90 days trading horizon Templeton Emerging Mkt is expected to under-perform the R Co. In addition to that, Templeton Emerging is 1.11 times more volatile than R co Valor F. It trades about -0.03 of its total potential returns per unit of risk. R co Valor F is currently generating about 0.08 per unit of volatility. If you would invest  303,178  in R co Valor F on December 28, 2024 and sell it today you would earn a total of  9,218  from holding R co Valor F or generate 3.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Templeton Emerging Mkt  vs.  R co Valor F

Templeton Emerging Mkt

Risk-Adjusted Performance

Very Weak

Over the last 90 days Templeton Emerging Mkt has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical and fundamental indicators, Templeton Emerging is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

R co Valor

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in R co Valor F are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, R Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Templeton Emerging and R Co

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

The idea behind Templeton Emerging Mkt and R co Valor F 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.