Correlation Between Equity Growth and Templeton China
Can any of the company-specific risk be diversified away by investing in both Equity Growth 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 Equity Growth and Templeton China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Growth Fund and Templeton China World, you can compare the effects of market volatilities on Equity Growth 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 Equity Growth with a short position of Templeton China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Templeton China.
Diversification Opportunities for Equity Growth and Templeton China
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Equity and TEMPLETON is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Fund 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 Equity 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 Equity Growth Fund 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 Equity Growth i.e., Equity Growth and Templeton China go up and down completely randomly.
Pair Corralation between Equity Growth and Templeton China
Assuming the 90 days horizon Equity Growth is expected to generate 1.08 times less return on investment than Templeton China. But when comparing it to its historical volatility, Equity Growth Fund is 2.2 times less risky than Templeton China. It trades about 0.13 of its potential returns per unit of risk. Templeton China World is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 741.00 in Templeton China World on August 31, 2024 and sell it today you would earn a total of 82.00 from holding Templeton China World or generate 11.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 81.75% |
| Values | Daily Returns |
Equity Growth Fund vs. Templeton China World
Performance |
| Timeline |
| Equity Growth |
| Templeton China World |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Equity Growth and Templeton China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and Templeton China
The main advantage of trading using opposite Equity Growth and Templeton China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth 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.| Equity Growth vs. Goldman Sachs Short Term | Equity Growth vs. Vanguard Institutional Short Term | Equity Growth vs. Sterling Capital Short | Equity Growth vs. Touchstone Ultra Short |
| Templeton China vs. Bbh Intermediate Municipal | Templeton China vs. Inflation Protected Bond Fund | Templeton China vs. Multisector Bond Sma | Templeton China vs. Blrc Sgy Mnp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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