Correlation Between Shelton Emerging and Templeton Developing

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

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

Diversification Opportunities for Shelton Emerging and Templeton Developing

0.96

Correlation Coefficient

Shelton Emerging  Templeton Developing

Almost no diversification

The 3 months correlation between Shelton and Templeton is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Shelton Emerging Markets and Templeton Developing Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Developing and Shelton 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 Shelton Emerging Markets are associated (or correlated) with Templeton Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Developing has no effect on the direction of Shelton Emerging i.e., Shelton Emerging and Templeton Developing go up and down completely randomly.

Pair Corralation between Shelton Emerging and Templeton Developing

Assuming the 90 days horizon Shelton Emerging Markets is expected to under-perform the Templeton Developing. But the mutual fund apears to be less risky and, when comparing its historical volatility, Shelton Emerging Markets is 1.09 times less risky than Templeton Developing. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Templeton Developing Markets is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,903  in Templeton Developing Markets on September 3, 2024 and sell it today you would earn a total of  46.00  from holding Templeton Developing Markets or generate 2.42% return on investment over 90 days.

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

Shelton Emerging Markets  vs.  Templeton Developing Markets

Shelton Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

Templeton Developing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Templeton Developing Markets are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Templeton Developing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shelton Emerging and Templeton Developing

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

The idea behind Shelton Emerging Markets and Templeton Developing 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.