Correlation Between Templeton Emerging and Templeton Emerging

Can any of the company-specific risk be diversified away by investing in both Templeton Emerging and Templeton Emerging 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 Templeton Emerging 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 Templeton Emerging Markets, you can compare the effects of market volatilities on Templeton Emerging and Templeton Emerging 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 Templeton Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Emerging and Templeton Emerging.

Diversification Opportunities for Templeton Emerging and Templeton Emerging

0.31

Correlation Coefficient

Templeton Emerging  Templeton Emerging

Weak diversification

The 3 months correlation between Templeton and Templeton is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Emerging Mkt and Templeton Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Emerging 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 Templeton Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Emerging has no effect on the direction of Templeton Emerging i.e., Templeton Emerging and Templeton Emerging go up and down completely randomly.

Pair Corralation between Templeton Emerging and Templeton Emerging

Assuming the 90 days trading horizon Templeton Emerging Mkt is expected to under-perform the Templeton Emerging. But the fund apears to be less risky and, when comparing its historical volatility, Templeton Emerging Mkt is 2.81 times less risky than Templeton Emerging. The fund trades about -0.02 of its potential returns per unit of risk. The Templeton Emerging Markets is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,318  in Templeton Emerging Markets on October 4, 2024 and sell it today you would earn a total of  58.00  from holding Templeton Emerging Markets or generate 1.34% 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.  Templeton Emerging Markets

Templeton Emerging Mkt

Risk-Adjusted Performance

0 of 100

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.

Templeton Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Templeton Emerging Markets 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.

Pair Trading with Templeton Emerging and Templeton Emerging

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

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