Correlation Between Templeton Dragon and Western Asset
Can any of the company-specific risk be diversified away by investing in both Templeton Dragon and Western Asset 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 Dragon and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Templeton Dragon Closed and Western Asset Global, you can compare the effects of market volatilities on Templeton Dragon and Western Asset 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 Dragon with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Dragon and Western Asset.
Diversification Opportunities for Templeton Dragon and Western Asset
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Templeton and Western is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Dragon Closed and Western Asset Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Global and Templeton Dragon 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 Dragon Closed are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Global has no effect on the direction of Templeton Dragon i.e., Templeton Dragon and Western Asset go up and down completely randomly.
Pair Corralation between Templeton Dragon and Western Asset
Considering the 90-day investment horizon Templeton Dragon Closed is expected to under-perform the Western Asset. In addition to that, Templeton Dragon is 2.76 times more volatile than Western Asset Global. It trades about -0.19 of its total potential returns per unit of risk. Western Asset Global is currently generating about -0.03 per unit of volatility. If you would invest 674.00 in Western Asset Global on August 28, 2024 and sell it today you would lose (3.00) from holding Western Asset Global or give up 0.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Templeton Dragon Closed vs. Western Asset Global
Performance |
| Timeline |
| Templeton Dragon Closed |
| Western Asset Global |
Templeton Dragon and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Templeton Dragon and Western Asset
The main advantage of trading using opposite Templeton Dragon and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton Dragon position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Templeton Dragon vs. Mexico Closed | Templeton Dragon vs. NXG NextGen Infrastructure | Templeton Dragon vs. Central Europe Russia | Templeton Dragon vs. Japan Smaller Capitalization |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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