Correlation Between Western Asset and Templeton Emerging
Can any of the company-specific risk be diversified away by investing in both Western Asset and Templeton Emerging 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 Western Asset and Templeton Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Global and Templeton Emerging Markets, you can compare the effects of market volatilities on Western Asset and Templeton Emerging 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 Western Asset with a short position of Templeton Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Templeton Emerging.
Diversification Opportunities for Western Asset and Templeton Emerging
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Templeton is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and Templeton Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Emerging and Western Asset 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 Western Asset Global are associated (or correlated) with Templeton Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Emerging has no effect on the direction of Western Asset i.e., Western Asset and Templeton Emerging go up and down completely randomly.
Pair Corralation between Western Asset and Templeton Emerging
Considering the 90-day investment horizon Western Asset is expected to generate 1.33 times less return on investment than Templeton Emerging. But when comparing it to its historical volatility, Western Asset Global is 1.1 times less risky than Templeton Emerging. It trades about 0.05 of its potential returns per unit of risk. Templeton Emerging Markets is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 436.00 in Templeton Emerging Markets on August 31, 2024 and sell it today you would earn a total of 101.00 from holding Templeton Emerging Markets or generate 23.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Western Asset Global vs. Templeton Emerging Markets
Performance |
| Timeline |
| Western Asset Global |
| Templeton Emerging |
Western Asset and Templeton Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Templeton Emerging
The main advantage of trading using opposite Western Asset and Templeton Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Templeton Emerging 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 Emerging will offset losses from the drop in Templeton Emerging's long position.| Western Asset vs. MFS Investment Grade | Western Asset vs. Eaton Vance Municipal | Western Asset vs. DTF Tax Free | Western Asset vs. HUMANA INC |
| Templeton Emerging vs. MFS Investment Grade | Templeton Emerging vs. Eaton Vance Municipal | Templeton Emerging vs. DTF Tax Free | Templeton Emerging vs. HUMANA INC |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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