Correlation Between Dupont De and Templeton China

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

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

Diversification Opportunities for Dupont De and Templeton China

0.8

Correlation Coefficient

Dupont De  Templeton China

Very poor diversification

The 3 months correlation between Dupont and Templeton is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Templeton China World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton China World and Dupont De 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 Dupont De Nemours are associated (or correlated) with Templeton China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton China World has no effect on the direction of Dupont De i.e., Dupont De and Templeton China go up and down completely randomly.

Pair Corralation between Dupont De and Templeton China

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to generate 1.15 times more return on investment than Templeton China. However, Dupont De is 1.15 times more volatile than Templeton China World. It trades about 0.2 of its potential returns per unit of risk. Templeton China World is currently generating about 0.16 per unit of risk. If you would invest  6,538  in Dupont De Nemours on February 6, 2024 and sell it today you would earn a total of  1,229  from holding Dupont De Nemours or generate 18.8% return on investment over 90 days.

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

Dupont De Nemours  vs.  Templeton China World

Dupont De Nemours

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Dupont De exhibited solid returns over the last few months and may actually be approaching a breakup point.

Templeton China World

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Templeton China World are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Dupont De and Templeton China

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

The idea behind Dupont De Nemours and Templeton China World 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.