Correlation Between Templeton Developing and Templeton Global

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

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

Diversification Opportunities for Templeton Developing and Templeton Global

0.89

Correlation Coefficient

Templeton Developing  Templeton Global

Very poor diversification

The 3 months correlation between Templeton and Templeton is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Developing Markets and Templeton Global Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Global Bond and Templeton Developing 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 Developing Markets are associated (or correlated) with Templeton Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Global Bond has no effect on the direction of Templeton Developing i.e., Templeton Developing and Templeton Global go up and down completely randomly.

Pair Corralation between Templeton Developing and Templeton Global

Assuming the 90 days horizon Templeton Developing Markets is expected to generate 1.6 times more return on investment than Templeton Global. However, Templeton Developing is 1.6 times more volatile than Templeton Global Bond. It trades about -0.13 of its potential returns per unit of risk. Templeton Global Bond is currently generating about -0.4 per unit of risk. If you would invest  2,047  in Templeton Developing Markets on September 30, 2024 and sell it today you would lose (147.00) from holding Templeton Developing Markets or give up 7.18% of portfolio value over 90 days.

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

Templeton Developing Markets  vs.  Templeton Global Bond

Templeton Developing

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 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 Templeton Developing and Templeton Global

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

The idea behind Templeton Developing Markets and Templeton Global Bond 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.