Correlation Between Templeton China and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both Templeton China and Absolute Convertible 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 China and Absolute Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Templeton China World and Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Templeton China and Absolute Convertible 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 China with a short position of Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton China and Absolute Convertible.
Diversification Opportunities for Templeton China and Absolute Convertible
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Templeton and Absolute is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Templeton China World and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible and Templeton China 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 China World are associated (or correlated) with Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Templeton China i.e., Templeton China and Absolute Convertible go up and down completely randomly.
Pair Corralation between Templeton China and Absolute Convertible
Assuming the 90 days horizon Templeton China World is expected to generate 31.0 times more return on investment than Absolute Convertible. However, Templeton China is 31.0 times more volatile than Absolute Convertible Arbitrage. It trades about 0.05 of its potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about 0.54 per unit of risk. If you would invest 701.00 in Templeton China World on September 12, 2024 and sell it today you would earn a total of 122.00 from holding Templeton China World or generate 17.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 87.85% |
| Values | Daily Returns |
Templeton China World vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| Templeton China World |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Absolute Convertible |
Templeton China and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Templeton China and Absolute Convertible
The main advantage of trading using opposite Templeton China and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton China position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible's long position.| Templeton China vs. Absolute Convertible Arbitrage | Templeton China vs. Gabelli Convertible And | Templeton China vs. Advent Claymore Convertible | Templeton China vs. Lord Abbett Convertible |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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