Correlation Between Templeton World and Templeton Growth
Can any of the company-specific risk be diversified away by investing in both Templeton World and Templeton Growth 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 Growth 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 Growth Fund, you can compare the effects of market volatilities on Templeton World and Templeton Growth 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 Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton World and Templeton Growth.
Diversification Opportunities for Templeton World and Templeton Growth
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Templeton and Templeton is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Templeton World Fund and Templeton Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Growth 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 Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Growth has no effect on the direction of Templeton World i.e., Templeton World and Templeton Growth go up and down completely randomly.
Pair Corralation between Templeton World and Templeton Growth
Assuming the 90 days horizon Templeton World Fund is expected to generate 1.2 times more return on investment than Templeton Growth. However, Templeton World is 1.2 times more volatile than Templeton Growth Fund. It trades about 0.08 of its potential returns per unit of risk. Templeton Growth Fund is currently generating about 0.05 per unit of risk. If you would invest 1,253 in Templeton World Fund on November 8, 2024 and sell it today you would earn a total of 490.00 from holding Templeton World Fund or generate 39.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Templeton World Fund vs. Templeton Growth Fund
Performance |
| Timeline |
| Templeton World |
| Templeton Growth |
Templeton World and Templeton Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Templeton World and Templeton Growth
The main advantage of trading using opposite Templeton World and Templeton Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton World position performs unexpectedly, Templeton Growth 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 Growth will offset losses from the drop in Templeton Growth's long position.| Templeton World vs. Vanguard Small Cap Value | Templeton World vs. American Century Etf | Templeton World vs. Heartland Value Plus | Templeton World vs. Small Cap Value Profund |
| Templeton Growth vs. Balanced Strategy Fund | Templeton Growth vs. Doubleline Emerging Markets | Templeton Growth vs. Eagle Mlp Strategy | Templeton Growth vs. Investec Emerging Markets |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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