Correlation Between Western Asset and Templeton Global

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Can any of the company-specific risk be diversified away by investing in both Western Asset and Templeton Global 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 Western Asset and Templeton Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Smash and Templeton Global Balanced, you can compare the effects of market volatilities on Western Asset and Templeton Global 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 Western Asset with a short position of Templeton Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Templeton Global.

Diversification Opportunities for Western Asset and Templeton Global

WesternTempletonDiversified AwayWesternTempletonDiversified Away100%
-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between Western and Templeton is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Smash and Templeton Global Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Global Balanced and Western Asset 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 Western Asset Smash are associated (or correlated) with Templeton Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Global Balanced has no effect on the direction of Western Asset i.e., Western Asset and Templeton Global go up and down completely randomly.

Pair Corralation between Western Asset and Templeton Global

Assuming the 90 days horizon Western Asset Smash is expected to under-perform the Templeton Global. In addition to that, Western Asset is 1.2 times more volatile than Templeton Global Balanced. It trades about -0.04 of its total potential returns per unit of risk. Templeton Global Balanced is currently generating about 0.21 per unit of volatility. If you would invest  248.00  in Templeton Global Balanced on November 25, 2024 and sell it today you would earn a total of  5.00  from holding Templeton Global Balanced or generate 2.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Western Asset Smash  vs.  Templeton Global Balanced

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -3-2-10123
JavaScript chart by amCharts 3.21.15WAADX TAGBX
       Timeline  
Western Asset Smash 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Smash are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb6.056.16.156.26.25
Templeton Global Balanced 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Templeton Global Balanced are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Templeton Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2.42.452.5

Western Asset and Templeton Global Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.12-0.8-0.48-0.160.02550.250.570.891.21 0.51.01.52.02.53.0
JavaScript chart by amCharts 3.21.15WAADX TAGBX
       Returns  

Pair Trading with Western Asset and Templeton Global

The main advantage of trading using opposite Western Asset and Templeton Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Templeton Global 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 Global will offset losses from the drop in Templeton Global's long position.
The idea behind Western Asset Smash and Templeton Global Balanced pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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