Correlation Between Templeton Growth and Capital World
Can any of the company-specific risk be diversified away by investing in both Templeton Growth and Capital World 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 Growth and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Templeton Growth Fund and Capital World Growth, you can compare the effects of market volatilities on Templeton Growth and Capital World 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 Growth with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Growth and Capital World.
Diversification Opportunities for Templeton Growth and Capital World
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Templeton and Capital is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Growth Fund and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Templeton Growth 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 Growth Fund are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Templeton Growth i.e., Templeton Growth and Capital World go up and down completely randomly.
Pair Corralation between Templeton Growth and Capital World
Assuming the 90 days horizon Templeton Growth Fund is expected to generate 1.17 times more return on investment than Capital World. However, Templeton Growth is 1.17 times more volatile than Capital World Growth. It trades about 0.0 of its potential returns per unit of risk. Capital World Growth is currently generating about -0.1 per unit of risk. If you would invest 2,652 in Templeton Growth Fund on January 17, 2024 and sell it today you would lose (3.00) from holding Templeton Growth Fund or give up 0.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Templeton Growth Fund vs. Capital World Growth
Performance |
| Timeline |
| Templeton Growth |
| Capital World Growth |
Templeton Growth and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Templeton Growth and Capital World
The main advantage of trading using opposite Templeton Growth and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton Growth position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Templeton Growth vs. Eaton Vance Tax Managed | Templeton Growth vs. Artisan Global Opportunities | Templeton Growth vs. Sit International Growth | Templeton Growth vs. Global Stock Fund |
| Capital World vs. American Mutual Fund | Capital World vs. American Mutual Fund | Capital World vs. American Funds Income | Capital World vs. American Funds Preservation |
Check out your portfolio center.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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