Correlation Between Templeton Foreign and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Templeton Foreign and Legg Mason 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 Foreign and Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Templeton Foreign Fund and Legg Mason Global, you can compare the effects of market volatilities on Templeton Foreign and Legg Mason 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 Foreign with a short position of Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Foreign and Legg Mason.
Diversification Opportunities for Templeton Foreign and Legg Mason
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Templeton and Legg is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Foreign Fund and Legg Mason Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Global and Templeton Foreign 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 Foreign Fund are associated (or correlated) with Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Global has no effect on the direction of Templeton Foreign i.e., Templeton Foreign and Legg Mason go up and down completely randomly.
Pair Corralation between Templeton Foreign and Legg Mason
Assuming the 90 days horizon Templeton Foreign Fund is expected to under-perform the Legg Mason. In addition to that, Templeton Foreign is 4.41 times more volatile than Legg Mason Global. It trades about -0.14 of its total potential returns per unit of risk. Legg Mason Global is currently generating about 0.06 per unit of volatility. If you would invest 949.00 in Legg Mason Global on August 27, 2024 and sell it today you would earn a total of 3.00 from holding Legg Mason Global or generate 0.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Templeton Foreign Fund vs. Legg Mason Global
Performance |
| Timeline |
| Templeton Foreign |
| Legg Mason Global |
Templeton Foreign and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Templeton Foreign and Legg Mason
The main advantage of trading using opposite Templeton Foreign and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton Foreign position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason's long position.| Templeton Foreign vs. Franklin Mutual Beacon | Templeton Foreign vs. Templeton Developing Markets | Templeton Foreign vs. Franklin Mutual Global | Templeton Foreign vs. Franklin Mutual Global |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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