Correlation Between Templeton Growth and Small Cap
Can any of the company-specific risk be diversified away by investing in both Templeton Growth and Small 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 Growth and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Templeton Growth Fund and Small Cap Value, you can compare the effects of market volatilities on Templeton Growth and Small 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 Growth with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Growth and Small Cap.
Diversification Opportunities for Templeton Growth and Small Cap
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Templeton and Small is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Growth Fund and Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Templeton Growth 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 Growth Fund are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Templeton Growth i.e., Templeton Growth and Small Cap go up and down completely randomly.
Pair Corralation between Templeton Growth and Small Cap
Assuming the 90 days horizon Templeton Growth is expected to generate 4.33 times less return on investment than Small Cap. But when comparing it to its historical volatility, Templeton Growth Fund is 2.07 times less risky than Small Cap. It trades about 0.07 of its potential returns per unit of risk. Small Cap Value is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,066 in Small Cap Value on September 12, 2024 and sell it today you would earn a total of 124.00 from holding Small Cap Value or generate 11.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Templeton Growth Fund vs. Small Cap Value
Performance |
| Timeline |
| Templeton Growth |
| Small Cap Value |
Templeton Growth and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Templeton Growth and Small Cap
The main advantage of trading using opposite Templeton Growth and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton Growth position performs unexpectedly, Small 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 Small Cap will offset losses from the drop in Small Cap's long position.| Templeton Growth vs. Transamerica Financial Life | Templeton Growth vs. Goldman Sachs Financial | Templeton Growth vs. Davis Financial Fund | Templeton Growth vs. Royce Global Financial |
| Small Cap vs. Cmg Ultra Short | Small Cap vs. Prudential Short Duration | Small Cap vs. Easterly Snow Longshort | Small Cap vs. Aqr Long Short Equity |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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