Correlation Between American Funds and Templeton Global
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Templeton Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2015 and Templeton Global Balanced, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Templeton Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Templeton Global.
Diversification Opportunities for American Funds and Templeton Global
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Templeton is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2015 and Templeton Global Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Global Balanced 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 2015 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 Balanced has no effect on the direction of American Funds i.e., American Funds and Templeton Global go up and down completely randomly.
Pair Corralation between American Funds and Templeton Global
Assuming the 90 days horizon American Funds is expected to generate 1.99 times less return on investment than Templeton Global. But when comparing it to its historical volatility, American Funds 2015 is 1.54 times less risky than Templeton Global. It trades about 0.25 of its potential returns per unit of risk. Templeton Global Balanced is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 239.00 in Templeton Global Balanced on November 4, 2024 and sell it today you would earn a total of 9.00 from holding Templeton Global Balanced or generate 3.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds 2015 vs. Templeton Global Balanced
Performance |
| Timeline |
| American Funds 2015 |
| Templeton Global Balanced |
American Funds and Templeton Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Templeton Global
The main advantage of trading using opposite American Funds and Templeton Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Fidelity Sai Convertible | American Funds vs. Allianzgi Convertible Income | American Funds vs. Gabelli Convertible And | American Funds vs. Absolute Convertible Arbitrage |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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