Correlation Between Ultralatin America and Templeton Emerging
Can any of the company-specific risk be diversified away by investing in both Ultralatin America 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 Ultralatin America and Templeton Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultralatin America Profund and Templeton Emerging Markets, you can compare the effects of market volatilities on Ultralatin America 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 Ultralatin America with a short position of Templeton Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultralatin America and Templeton Emerging.
Diversification Opportunities for Ultralatin America and Templeton Emerging
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ultralatin and Templeton is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ultralatin America Profund and Templeton Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Emerging and Ultralatin America 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 Ultralatin America Profund 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 Ultralatin America i.e., Ultralatin America and Templeton Emerging go up and down completely randomly.
Pair Corralation between Ultralatin America and Templeton Emerging
Assuming the 90 days horizon Ultralatin America Profund is expected to under-perform the Templeton Emerging. In addition to that, Ultralatin America is 4.99 times more volatile than Templeton Emerging Markets. It trades about -0.22 of its total potential returns per unit of risk. Templeton Emerging Markets is currently generating about -0.15 per unit of volatility. If you would invest 1,425 in Templeton Emerging Markets on October 6, 2024 and sell it today you would lose (61.00) from holding Templeton Emerging Markets or give up 4.28% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Ultralatin America Profund vs. Templeton Emerging Markets
Performance |
Timeline |
Ultralatin America |
Templeton Emerging |
Ultralatin America and Templeton Emerging Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ultralatin America and Templeton Emerging
The main advantage of trading using opposite Ultralatin America and Templeton Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultralatin America 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.Ultralatin America vs. Short Real Estate | Ultralatin America vs. Short Real Estate | Ultralatin America vs. Ultrashort Mid Cap Profund | Ultralatin America vs. Ultrashort Mid Cap Profund |
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Check out your portfolio center.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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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