Correlation Between Templeton Emerging and Templeton Asian

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

Diversification Opportunities for Templeton Emerging and Templeton Asian

0.76

Correlation Coefficient

Templeton Emerging  Templeton Asian

Poor diversification

The 3 months correlation between Templeton and Templeton is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Emerging Mkt and Templeton Asian Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Asian Bond 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 Asian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Asian Bond has no effect on the direction of Templeton Emerging i.e., Templeton Emerging and Templeton Asian go up and down completely randomly.

Pair Corralation between Templeton Emerging and Templeton Asian

Assuming the 90 days trading horizon Templeton Emerging Mkt is expected to under-perform the Templeton Asian. In addition to that, Templeton Emerging is 1.54 times more volatile than Templeton Asian Bond. It trades about -0.02 of its total potential returns per unit of risk. Templeton Asian Bond is currently generating about 0.15 per unit of volatility. If you would invest  1,683  in Templeton Asian Bond on October 4, 2024 and sell it today you would earn a total of  109.00  from holding Templeton Asian Bond or generate 6.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.18%
Values	Daily Returns

Templeton Emerging Mkt  vs.  Templeton Asian Bond

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 Asian Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Templeton Asian Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical and fundamental indicators, Templeton Asian 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 Asian

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

The idea behind Templeton Emerging Mkt and Templeton Asian Bond 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.