Correlation Between Templeton Constrained and Large Cap
Can any of the company-specific risk be diversified away by investing in both Templeton Constrained and Large Cap 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 Constrained and Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Templeton Strained Bond and Large Cap Equity, you can compare the effects of market volatilities on Templeton Constrained and Large Cap 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 Constrained with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Constrained and Large Cap.
Diversification Opportunities for Templeton Constrained and Large Cap
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TEMPLETON and Large is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Strained Bond and Large Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Equity and Templeton Constrained 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 Strained Bond are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Equity has no effect on the direction of Templeton Constrained i.e., Templeton Constrained and Large Cap go up and down completely randomly.
Pair Corralation between Templeton Constrained and Large Cap
Assuming the 90 days horizon Templeton Constrained is expected to generate 3.55 times less return on investment than Large Cap. But when comparing it to its historical volatility, Templeton Strained Bond is 13.32 times less risky than Large Cap. It trades about 0.93 of its potential returns per unit of risk. Large Cap Equity is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,189 in Large Cap Equity on September 2, 2024 and sell it today you would earn a total of 41.00 from holding Large Cap Equity or generate 3.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Templeton Strained Bond vs. Large Cap Equity
Performance |
| Timeline |
| Templeton Strained Bond |
| Large Cap Equity |
Templeton Constrained and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Templeton Constrained and Large Cap
The main advantage of trading using opposite Templeton Constrained and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton Constrained position performs unexpectedly, Large Cap 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 Large Cap will offset losses from the drop in Large Cap's long position.| Templeton Constrained vs. Live Oak Health | Templeton Constrained vs. Lord Abbett Health | Templeton Constrained vs. Blackrock Health Sciences | Templeton Constrained vs. Health Care Fund |
| Large Cap vs. Fidelity Select Semiconductors | Large Cap vs. Westwood Largecap Value | Large Cap vs. Russell 2000 2x | Large Cap vs. Federated Hermes Conservative |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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