Correlation Between Clearbridge International and Templeton Foreign
Can any of the company-specific risk be diversified away by investing in both Clearbridge International and Templeton Foreign 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 Clearbridge International and Templeton Foreign into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clearbridge International Growth and Templeton Foreign Fund, you can compare the effects of market volatilities on Clearbridge International and Templeton Foreign 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 Clearbridge International with a short position of Templeton Foreign. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearbridge International and Templeton Foreign.
Diversification Opportunities for Clearbridge International and Templeton Foreign
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Clearbridge and Templeton is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge International Grow and Templeton Foreign Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Foreign and Clearbridge International 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 Clearbridge International Growth are associated (or correlated) with Templeton Foreign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Foreign has no effect on the direction of Clearbridge International i.e., Clearbridge International and Templeton Foreign go up and down completely randomly.
Pair Corralation between Clearbridge International and Templeton Foreign
Assuming the 90 days horizon Clearbridge International is expected to generate 3.56 times less return on investment than Templeton Foreign. But when comparing it to its historical volatility, Clearbridge International Growth is 1.31 times less risky than Templeton Foreign. It trades about 0.04 of its potential returns per unit of risk. Templeton Foreign Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 765.00 in Templeton Foreign Fund on October 19, 2024 and sell it today you would earn a total of 13.00 from holding Templeton Foreign Fund or generate 1.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Clearbridge International Grow vs. Templeton Foreign Fund
Performance |
| Timeline |
| Clearbridge International |
| Templeton Foreign |
Clearbridge International and Templeton Foreign Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clearbridge International and Templeton Foreign
The main advantage of trading using opposite Clearbridge International and Templeton Foreign positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearbridge International position performs unexpectedly, Templeton Foreign 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 Foreign will offset losses from the drop in Templeton Foreign's long position.The idea behind Clearbridge International Growth and Templeton Foreign 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.
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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