Correlation Between Western Asset and Templeton World
Can any of the company-specific risk be diversified away by investing in both Western Asset and Templeton World 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 World 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 World Fund, you can compare the effects of market volatilities on Western Asset and Templeton World 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 World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Templeton World.
Diversification Opportunities for Western Asset and Templeton World
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Templeton is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Smash and Templeton World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton World 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 World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton World has no effect on the direction of Western Asset i.e., Western Asset and Templeton World go up and down completely randomly.
Pair Corralation between Western Asset and Templeton World
Assuming the 90 days horizon Western Asset is expected to generate 127.67 times less return on investment than Templeton World. But when comparing it to its historical volatility, Western Asset Smash is 3.25 times less risky than Templeton World. It trades about 0.0 of its potential returns per unit of risk. Templeton World Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,684 in Templeton World Fund on August 31, 2024 and sell it today you would earn a total of 13.00 from holding Templeton World Fund or generate 0.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Smash vs. Templeton World Fund
Performance |
| Timeline |
| Western Asset Smash |
| Templeton World |
Western Asset and Templeton World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Templeton World
The main advantage of trading using opposite Western Asset and Templeton World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Templeton World 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 World will offset losses from the drop in Templeton World's long position.| Western Asset vs. Fidelity Capital Income | Western Asset vs. Lord Abbett High | Western Asset vs. Virtus High Yield | Western Asset vs. Msift High Yield |
| Templeton World vs. Materials Portfolio Fidelity | Templeton World vs. T Rowe Price | Templeton World vs. Leggmason Partners Institutional | Templeton World vs. Rbb Fund |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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