Correlation Between Templeton China and Sarofim Equity
Can any of the company-specific risk be diversified away by investing in both Templeton China and Sarofim Equity 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 Sarofim Equity 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 Sarofim Equity, you can compare the effects of market volatilities on Templeton China and Sarofim Equity 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 Sarofim Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton China and Sarofim Equity.
Diversification Opportunities for Templeton China and Sarofim Equity
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Templeton and Sarofim is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Templeton China World and Sarofim Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarofim Equity 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 Sarofim Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarofim Equity has no effect on the direction of Templeton China i.e., Templeton China and Sarofim Equity go up and down completely randomly.
Pair Corralation between Templeton China and Sarofim Equity
Assuming the 90 days horizon Templeton China World is expected to under-perform the Sarofim Equity. In addition to that, Templeton China is 1.93 times more volatile than Sarofim Equity. It trades about -0.01 of its total potential returns per unit of risk. Sarofim Equity is currently generating about 0.06 per unit of volatility. If you would invest 1,342 in Sarofim Equity on September 5, 2024 and sell it today you would earn a total of 383.00 from holding Sarofim Equity or generate 28.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.75% |
| Values | Daily Returns |
Templeton China World vs. Sarofim Equity
Performance |
| Timeline |
| Templeton China World |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Sarofim Equity |
Templeton China and Sarofim Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Templeton China and Sarofim Equity
The main advantage of trading using opposite Templeton China and Sarofim Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton China position performs unexpectedly, Sarofim Equity 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 Sarofim Equity will offset losses from the drop in Sarofim Equity's long position.| Templeton China vs. Sarofim Equity | Templeton China vs. Rbc Global Equity | Templeton China vs. Calamos Global Equity | Templeton China vs. Gmo Global Equity |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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