Correlation Between Western Asset and Franklin Templeton
Can any of the company-specific risk be diversified away by investing in both Western Asset and Franklin Templeton 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 Franklin Templeton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Emerging and Franklin Templeton Limited, you can compare the effects of market volatilities on Western Asset and Franklin Templeton 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 Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Franklin Templeton.
Diversification Opportunities for Western Asset and Franklin Templeton
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Franklin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Emerging and Franklin Templeton Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton 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 Emerging are associated (or correlated) with Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton has no effect on the direction of Western Asset i.e., Western Asset and Franklin Templeton go up and down completely randomly.
Pair Corralation between Western Asset and Franklin Templeton
Considering the 90-day investment horizon Western Asset Emerging is expected to generate 1.5 times more return on investment than Franklin Templeton. However, Western Asset is 1.5 times more volatile than Franklin Templeton Limited. It trades about 0.37 of its potential returns per unit of risk. Franklin Templeton Limited is currently generating about 0.35 per unit of risk. If you would invest 957.00 in Western Asset Emerging on September 5, 2024 and sell it today you would earn a total of 58.00 from holding Western Asset Emerging or generate 6.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Emerging vs. Franklin Templeton Limited
Performance |
| Timeline |
| Western Asset Emerging |
| Franklin Templeton |
Western Asset and Franklin Templeton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Franklin Templeton
The main advantage of trading using opposite Western Asset and Franklin Templeton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Franklin Templeton 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 Franklin Templeton will offset losses from the drop in Franklin Templeton's long position.| Western Asset vs. Franklin Templeton Limited | Western Asset vs. Western Asset Global | Western Asset vs. MFS Multimarket Income | Western Asset vs. Aberdeen Asia Pacific If |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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