Correlation Between Templeton World and Global Equity
Can any of the company-specific risk be diversified away by investing in both Templeton World and Global Equity 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 World and Global Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Templeton World Fund and Global Equity Portfolio, you can compare the effects of market volatilities on Templeton World and Global Equity 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 World with a short position of Global Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton World and Global Equity.
Diversification Opportunities for Templeton World and Global Equity
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Templeton and Global is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Templeton World Fund and Global Equity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Equity Portfolio and Templeton World 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 World Fund are associated (or correlated) with Global Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Equity Portfolio has no effect on the direction of Templeton World i.e., Templeton World and Global Equity go up and down completely randomly.
Pair Corralation between Templeton World and Global Equity
Assuming the 90 days horizon Templeton World Fund is expected to generate 1.18 times more return on investment than Global Equity. However, Templeton World is 1.18 times more volatile than Global Equity Portfolio. It trades about 0.05 of its potential returns per unit of risk. Global Equity Portfolio is currently generating about 0.04 per unit of risk. If you would invest 1,213 in Templeton World Fund on January 20, 2024 and sell it today you would earn a total of 325.00 from holding Templeton World Fund or generate 26.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 99.79% |
Values | Daily Returns |
Templeton World Fund vs. Global Equity Portfolio
Performance |
Timeline |
Templeton World |
Global Equity Portfolio |
Templeton World and Global Equity Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Templeton World and Global Equity
The main advantage of trading using opposite Templeton World and Global Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton World position performs unexpectedly, Global Equity 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 Global Equity will offset losses from the drop in Global Equity's long position.Templeton World vs. Commonwealth Real Estate | Templeton World vs. Gamco Global Opportunity | Templeton World vs. HUMANA INC | Templeton World vs. Aquagold International |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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