Correlation Between American Funds and Templeton World
Can any of the company-specific risk be diversified away by investing in both American Funds and Templeton 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 American Funds and Templeton World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Global and Templeton World Fund, you can compare the effects of market volatilities on American Funds and Templeton 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 American Funds with a short position of Templeton World. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Templeton World.
Diversification Opportunities for American Funds and Templeton World
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Templeton is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Global and Templeton World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton World and American Funds 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 American Funds Global are associated (or correlated) with Templeton World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton World has no effect on the direction of American Funds i.e., American Funds and Templeton World go up and down completely randomly.
Pair Corralation between American Funds and Templeton World
Assuming the 90 days horizon American Funds is expected to generate 1.4 times less return on investment than Templeton World. But when comparing it to its historical volatility, American Funds Global is 1.12 times less risky than Templeton World. It trades about 0.04 of its potential returns per unit of risk. Templeton World Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,199 in Templeton World Fund on January 25, 2024 and sell it today you would earn a total of 358.00 from holding Templeton World Fund or generate 29.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
American Funds Global vs. Templeton World Fund
Performance |
Timeline |
American Funds Global |
Templeton World |
American Funds and Templeton World Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Funds and Templeton World
The main advantage of trading using opposite American Funds and Templeton World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Templeton 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 Templeton World will offset losses from the drop in Templeton World's long position.American Funds vs. Mesirow Financial Small | American Funds vs. Prudential Jennison Financial | American Funds vs. Angel Oak Financial | American Funds vs. Fidelity Advisor Financial |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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