Correlation Between Templeton Global and Aim Investment

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

By analyzing existing cross correlation between Templeton Global Bond and Aim Investment Funds, you can compare the effects of market volatilities on Templeton Global and Aim Investment 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 Global with a short position of Aim Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Global and Aim Investment.

Diversification Opportunities for Templeton Global and Aim Investment

0.93

Correlation Coefficient

Templeton Global  Aim Investment

Almost no diversification

The 3 months correlation between Templeton and Aim is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Global Bond and Aim Investment Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aim Investment Funds and Templeton Global 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 Global Bond are associated (or correlated) with Aim Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aim Investment Funds has no effect on the direction of Templeton Global i.e., Templeton Global and Aim Investment go up and down completely randomly.

Pair Corralation between Templeton Global and Aim Investment

Assuming the 90 days horizon Templeton Global Bond is expected to under-perform the Aim Investment. In addition to that, Templeton Global is 1.4 times more volatile than Aim Investment Funds. It trades about -0.21 of its total potential returns per unit of risk. Aim Investment Funds is currently generating about -0.06 per unit of volatility. If you would invest  441.00  in Aim Investment Funds on September 12, 2024 and sell it today you would lose (7.00) from holding Aim Investment Funds or give up 1.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Templeton Global Bond  vs.  Aim Investment Funds

Templeton Global Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Templeton Global Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Aim Investment Funds

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Templeton Global and Aim Investment

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

The idea behind Templeton Global Bond and Aim Investment Funds 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.