Correlation Between Western Asset and Templeton Emerging
Can any of the company-specific risk be diversified away by investing in both Western Asset and Templeton Emerging 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 Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Total and Templeton Emerging Markets, you can compare the effects of market volatilities on Western Asset and Templeton Emerging 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 Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Templeton Emerging.
Diversification Opportunities for Western Asset and Templeton Emerging
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Templeton is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Total and Templeton Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Emerging 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 Total are associated (or correlated) with Templeton Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Emerging has no effect on the direction of Western Asset i.e., Western Asset and Templeton Emerging go up and down completely randomly.
Pair Corralation between Western Asset and Templeton Emerging
Assuming the 90 days horizon Western Asset Total is expected to generate 0.39 times more return on investment than Templeton Emerging. However, Western Asset Total is 2.56 times less risky than Templeton Emerging. It trades about 0.11 of its potential returns per unit of risk. Templeton Emerging Markets is currently generating about -0.31 per unit of risk. If you would invest 904.00 in Western Asset Total on August 24, 2024 and sell it today you would earn a total of 4.00 from holding Western Asset Total or generate 0.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Total vs. Templeton Emerging Markets
Performance |
| Timeline |
| Western Asset Total |
| Templeton Emerging |
Western Asset and Templeton Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Templeton Emerging
The main advantage of trading using opposite Western Asset and Templeton Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Templeton Emerging 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 Emerging will offset losses from the drop in Templeton Emerging's long position.| Western Asset vs. Blackrock Strategic Income | Western Asset vs. Blackrock Strategic Opps | Western Asset vs. Blackrock Strategic Opps | Western Asset vs. Jpmorgan Strategic Income |
| Templeton Emerging vs. Transamerica Large Cap | Templeton Emerging vs. Legg Mason Bw | Templeton Emerging vs. Aqr Large Cap | Templeton Emerging vs. William Blair Large |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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