Correlation Between UBS Money and Templeton Emerging

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

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

Diversification Opportunities for UBS Money and Templeton Emerging

-0.09

Correlation Coefficient

UBS Money  Templeton Emerging

Good diversification

The 3 months correlation between UBS and Templeton is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding UBS Money Market and Templeton Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Emerging and UBS Money 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 UBS Money Market 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 UBS Money i.e., UBS Money and Templeton Emerging go up and down completely randomly.

Pair Corralation between UBS Money and Templeton Emerging

Assuming the 90 days trading horizon UBS Money Market is expected to under-perform the Templeton Emerging. But the fund apears to be less risky and, when comparing its historical volatility, UBS Money Market is 2.34 times less risky than Templeton Emerging. The fund trades about -0.08 of its potential returns per unit of risk. The Templeton Emerging Markets is currently generating about 0.04 of returns per unit of risk over similar time horizon. 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

UBS Money Market  vs.  Templeton Emerging Markets

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.

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.

Pair Trading with UBS Money and Templeton Emerging

The main advantage of trading using opposite UBS Money and Templeton Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UBS Money 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 UBS Money Market 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.