Correlation Between Small Company and Templeton Emerging
Can any of the company-specific risk be diversified away by investing in both Small Company and Templeton Emerging 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 Small Company and Templeton Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Pany Growth and Templeton Emerging Markets, you can compare the effects of market volatilities on Small Company and Templeton Emerging 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 Small Company with a short position of Templeton Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Company and Templeton Emerging.
Diversification Opportunities for Small Company and Templeton Emerging
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Small and Templeton is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Templeton Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Emerging and Small Company 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 Small Pany Growth are associated (or correlated) with Templeton Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Emerging has no effect on the direction of Small Company i.e., Small Company and Templeton Emerging go up and down completely randomly.
Pair Corralation between Small Company and Templeton Emerging
Assuming the 90 days horizon Small Pany Growth is expected to generate 2.93 times more return on investment than Templeton Emerging. However, Small Company is 2.93 times more volatile than Templeton Emerging Markets. It trades about 0.07 of its potential returns per unit of risk. Templeton Emerging Markets is currently generating about 0.04 per unit of risk. If you would invest 879.00 in Small Pany Growth on September 3, 2024 and sell it today you would earn a total of 790.00 from holding Small Pany Growth or generate 89.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Pany Growth vs. Templeton Emerging Markets
Performance |
| Timeline |
| Small Pany Growth |
| Templeton Emerging |
Small Company and Templeton Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Company and Templeton Emerging
The main advantage of trading using opposite Small Company and Templeton Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Company position performs unexpectedly, Templeton Emerging 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 Emerging will offset losses from the drop in Templeton Emerging's long position.| Small Company vs. Mid Cap Growth | Small Company vs. Growth Portfolio Class | Small Company vs. Morgan Stanley Multi | Small Company vs. Emerging Markets Portfolio |
| Templeton Emerging vs. Small Pany Growth | Templeton Emerging vs. Rbb Fund | Templeton Emerging vs. Small Midcap Dividend Income | Templeton Emerging vs. Qs Small Capitalization |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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