Correlation Between Cutler Equity and Templeton Foreign

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

By analyzing existing cross correlation between Cutler Equity and Templeton Foreign Fund, you can compare the effects of market volatilities on Cutler Equity and Templeton Foreign 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 Cutler Equity with a short position of Templeton Foreign. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cutler Equity and Templeton Foreign.

Diversification Opportunities for Cutler Equity and Templeton Foreign

0.31

Correlation Coefficient

Cutler Equity  Templeton Foreign

Weak diversification

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

Pair Corralation between Cutler Equity and Templeton Foreign

Assuming the 90 days horizon Cutler Equity is expected to generate 0.99 times more return on investment than Templeton Foreign. However, Cutler Equity is 1.01 times less risky than Templeton Foreign. It trades about -0.11 of its potential returns per unit of risk. Templeton Foreign Fund is currently generating about -0.23 per unit of risk. If you would invest  2,825  in Cutler Equity on September 26, 2024 and sell it today you would lose (173.00) from holding Cutler Equity or give up 6.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cutler Equity  vs.  Templeton Foreign Fund

Cutler Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cutler Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Cutler Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Templeton Foreign

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Templeton Foreign Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Cutler Equity and Templeton Foreign

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

The idea behind Cutler Equity and Templeton Foreign Fund 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.