Correlation Between GM and Templeton World
Can any of the company-specific risk be diversified away by investing in both GM and Templeton World 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 GM and Templeton World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Templeton World Fund, you can compare the effects of market volatilities on GM and Templeton World 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 GM with a short position of Templeton World. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Templeton World.
Diversification Opportunities for GM and Templeton World
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GM and Templeton is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Templeton World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton World and GM 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 General Motors are associated (or correlated) with Templeton World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton World has no effect on the direction of GM i.e., GM and Templeton World go up and down completely randomly.
Pair Corralation between GM and Templeton World
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Templeton World. In addition to that, GM is 3.42 times more volatile than Templeton World Fund. It trades about -0.05 of its total potential returns per unit of risk. Templeton World Fund is currently generating about 0.22 per unit of volatility. If you would invest 1,665 in Templeton World Fund on November 3, 2024 and sell it today you would earn a total of 66.00 from holding Templeton World Fund or generate 3.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Templeton World Fund
Performance |
| Timeline |
| General Motors |
| Templeton World |
GM and Templeton World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Templeton World
The main advantage of trading using opposite GM and Templeton World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Templeton World 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 World will offset losses from the drop in Templeton World's long position.The idea behind General Motors and Templeton World Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Templeton World vs. Tiaa Cref Real Estate | Templeton World vs. Columbia Real Estate | Templeton World vs. Tiaa Cref Real Estate | Templeton World vs. Short Real Estate |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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