Correlation Between Templeton China and Highland Global

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

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

Diversification Opportunities for Templeton China and Highland Global

-0.41

Correlation Coefficient

Templeton China  Highland Global

Very good diversification

The 3 months correlation between Templeton and Highland is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Templeton China World and Highland Global Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Global Allo and Templeton China 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 China World are associated (or correlated) with Highland Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Global Allo has no effect on the direction of Templeton China i.e., Templeton China and Highland Global go up and down completely randomly.

Pair Corralation between Templeton China and Highland Global

Assuming the 90 days horizon Templeton China World is expected to generate 3.1 times more return on investment than Highland Global. However, Templeton China is 3.1 times more volatile than Highland Global Allocation. It trades about 0.15 of its potential returns per unit of risk. Highland Global Allocation is currently generating about 0.04 per unit of risk. If you would invest  704.00  in Templeton China World on September 2, 2024 and sell it today you would earn a total of  118.00  from holding Templeton China World or generate 16.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	62.5%
Values	Daily Returns

Templeton China World  vs.  Highland Global Allocation

Templeton China World

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Templeton China World has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Templeton China showed solid returns over the last few months and may actually be approaching a breakup point.

Highland Global Allo

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Highland Global Allocation are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong essential indicators, Highland Global 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 China and Highland Global

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

The idea behind Templeton China World and Highland Global Allocation 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.