Correlation Between Templeton Strained and Baron Emerging

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

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

Diversification Opportunities for Templeton Strained and Baron Emerging

-0.35

Correlation Coefficient

Templeton Strained  Baron Emerging

Very good diversification

The 3 months correlation between Templeton and Baron is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Strained Bond and Baron Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Emerging Markets and Templeton Strained 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 Strained Bond are associated (or correlated) with Baron Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Emerging Markets has no effect on the direction of Templeton Strained i.e., Templeton Strained and Baron Emerging go up and down completely randomly.

Pair Corralation between Templeton Strained and Baron Emerging

Assuming the 90 days horizon Templeton Strained Bond is expected to under-perform the Baron Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Templeton Strained Bond is 2.02 times less risky than Baron Emerging. The mutual fund trades about -0.32 of its potential returns per unit of risk. The Baron Emerging Markets is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,538  in Baron Emerging Markets on September 28, 2024 and sell it today you would lose (12.00) from holding Baron Emerging Markets or give up 0.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Templeton Strained Bond  vs.  Baron Emerging Markets

Templeton Strained Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Baron Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baron Emerging Markets 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.

Pair Trading with Templeton Strained and Baron Emerging

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

The idea behind Templeton Strained Bond and Baron 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.