Correlation Between Absolute Convertible and Templeton China
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible 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 Absolute Convertible and Templeton China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and Templeton China World, you can compare the effects of market volatilities on Absolute Convertible 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 Absolute Convertible with a short position of Templeton China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Templeton China.
Diversification Opportunities for Absolute Convertible and Templeton China
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Absolute and Templeton is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage 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 Absolute Convertible 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 Absolute Convertible Arbitrage 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 Absolute Convertible i.e., Absolute Convertible and Templeton China go up and down completely randomly.
Pair Corralation between Absolute Convertible and Templeton China
Assuming the 90 days horizon Absolute Convertible is expected to generate 2.98 times less return on investment than Templeton China. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 31.0 times less risky than Templeton China. It trades about 0.54 of its potential returns per unit of risk. Templeton China World is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 701.00 in Templeton China World on September 12, 2024 and sell it today you would earn a total of 122.00 from holding Templeton China World or generate 17.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 87.85% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Templeton China World
Performance |
| Timeline |
| Absolute Convertible |
| Templeton China World |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Absolute Convertible and Templeton China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Templeton China
The main advantage of trading using opposite Absolute Convertible and Templeton China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible 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.| Absolute Convertible vs. Vy Goldman Sachs | Absolute Convertible vs. Invesco Gold Special | Absolute Convertible vs. Short Precious Metals | Absolute Convertible vs. Franklin Gold Precious |
| Templeton China vs. Absolute Convertible Arbitrage | Templeton China vs. Gabelli Convertible And | Templeton China vs. Advent Claymore Convertible | Templeton China vs. Lord Abbett Convertible |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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