Correlation Between Templeton China and Vela International
Can any of the company-specific risk be diversified away by investing in both Templeton China and Vela International 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 Templeton China and Vela International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Templeton China World and Vela International, you can compare the effects of market volatilities on Templeton China and Vela International 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 Templeton China with a short position of Vela International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton China and Vela International.
Diversification Opportunities for Templeton China and Vela International
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Templeton and Vela is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Templeton China World and Vela International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vela International and Templeton China 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 Templeton China World are associated (or correlated) with Vela International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vela International has no effect on the direction of Templeton China i.e., Templeton China and Vela International go up and down completely randomly.
Pair Corralation between Templeton China and Vela International
Assuming the 90 days horizon Templeton China is expected to generate 6.95 times less return on investment than Vela International. In addition to that, Templeton China is 2.31 times more volatile than Vela International. It trades about 0.0 of its total potential returns per unit of risk. Vela International is currently generating about 0.04 per unit of volatility. If you would invest 1,212 in Vela International on August 31, 2024 and sell it today you would earn a total of 134.00 from holding Vela International or generate 11.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 93.83% |
| Values | Daily Returns |
Templeton China World vs. Vela International
Performance |
| Timeline |
| Templeton China World |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Vela International |
Templeton China and Vela International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Templeton China and Vela International
The main advantage of trading using opposite Templeton China and Vela International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton China position performs unexpectedly, Vela International 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 Vela International will offset losses from the drop in Vela International's long position.| Templeton China vs. Jhancock Real Estate | Templeton China vs. Franklin Real Estate | Templeton China vs. Amg Managers Centersquare | Templeton China vs. Deutsche Real Estate |
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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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