Correlation Between Templeton World and Templeton Foreign
Can any of the company-specific risk be diversified away by investing in both Templeton World and Templeton Foreign 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 World and Templeton Foreign into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Templeton World Fund and Templeton Foreign Fund, you can compare the effects of market volatilities on Templeton World and Templeton Foreign 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 World with a short position of Templeton Foreign. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton World and Templeton Foreign.
Diversification Opportunities for Templeton World and Templeton Foreign
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Templeton and Templeton is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Templeton World Fund and Templeton Foreign Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Foreign and Templeton World 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 World Fund are associated (or correlated) with Templeton Foreign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Foreign has no effect on the direction of Templeton World i.e., Templeton World and Templeton Foreign go up and down completely randomly.
Pair Corralation between Templeton World and Templeton Foreign
Assuming the 90 days horizon Templeton World Fund is expected to generate 0.68 times more return on investment than Templeton Foreign. However, Templeton World Fund is 1.47 times less risky than Templeton Foreign. It trades about 0.18 of its potential returns per unit of risk. Templeton Foreign Fund is currently generating about -0.06 per unit of risk. If you would invest 1,758 in Templeton World Fund on September 2, 2024 and sell it today you would earn a total of 49.00 from holding Templeton World Fund or generate 2.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Templeton World Fund vs. Templeton Foreign Fund
Performance |
| Timeline |
| Templeton World |
| Templeton Foreign |
Templeton World and Templeton Foreign Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Templeton World and Templeton Foreign
The main advantage of trading using opposite Templeton World and Templeton Foreign positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton World position performs unexpectedly, Templeton Foreign 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 Foreign will offset losses from the drop in Templeton Foreign's long position.| Templeton World vs. Us Strategic Equity | Templeton World vs. The Gabelli Equity | Templeton World vs. Balanced Fund Retail | Templeton World vs. Us Vector Equity |
| Templeton Foreign vs. Franklin Mutual Beacon | Templeton Foreign vs. Templeton Developing Markets | Templeton Foreign vs. Franklin Mutual Global | Templeton Foreign vs. Franklin Mutual Global |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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