Correlation Between Templeton Emerging and UBS Money

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

By analyzing existing cross correlation between Templeton Emerging Markets and UBS Money Market, you can compare the effects of market volatilities on Templeton Emerging and UBS Money 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 UBS Money. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Emerging and UBS Money.

Diversification Opportunities for Templeton Emerging and UBS Money

-0.09

Correlation Coefficient

Templeton Emerging  UBS Money

Good diversification

The 3 months correlation between Templeton and UBS is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Emerging Markets and UBS Money Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS Money Market 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 Markets are associated (or correlated) with UBS Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS Money Market has no effect on the direction of Templeton Emerging i.e., Templeton Emerging and UBS Money go up and down completely randomly.

Pair Corralation between Templeton Emerging and UBS Money

Assuming the 90 days trading horizon Templeton Emerging Markets is expected to generate 2.34 times more return on investment than UBS Money. However, Templeton Emerging is 2.34 times more volatile than UBS Money Market. It trades about 0.04 of its potential returns per unit of risk. UBS Money Market is currently generating about -0.08 per unit of risk. If you would invest  4,471  in Templeton Emerging Markets on December 22, 2024 and sell it today you would earn a total of  125.00  from holding Templeton Emerging Markets or generate 2.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Templeton Emerging Markets  vs.  UBS Money Market

Templeton Emerging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Templeton Emerging Markets are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, Templeton Emerging is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

UBS Money Market

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Templeton Emerging and UBS Money

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

The idea behind Templeton Emerging Markets and UBS Money Market 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.