Correlation Between Western Asset and Templeton Developing
Can any of the company-specific risk be diversified away by investing in both Western Asset and Templeton Developing 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 Developing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Inflation and Templeton Developing Markets, you can compare the effects of market volatilities on Western Asset and Templeton Developing 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 Developing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Templeton Developing.
Diversification Opportunities for Western Asset and Templeton Developing
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Western and Templeton is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Inflation and Templeton Developing Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Developing 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 Inflation are associated (or correlated) with Templeton Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Developing has no effect on the direction of Western Asset i.e., Western Asset and Templeton Developing go up and down completely randomly.
Pair Corralation between Western Asset and Templeton Developing
Assuming the 90 days horizon Western Asset is expected to generate 2.59 times less return on investment than Templeton Developing. But when comparing it to its historical volatility, Western Asset Inflation is 2.63 times less risky than Templeton Developing. It trades about 0.06 of its potential returns per unit of risk. Templeton Developing Markets is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,680 in Templeton Developing Markets on September 12, 2024 and sell it today you would earn a total of 299.00 from holding Templeton Developing Markets or generate 17.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Inflation vs. Templeton Developing Markets
Performance |
| Timeline |
| Western Asset Inflation |
| Templeton Developing |
Western Asset and Templeton Developing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Templeton Developing
The main advantage of trading using opposite Western Asset and Templeton Developing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Templeton Developing 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 Developing will offset losses from the drop in Templeton Developing's long position.| Western Asset vs. Ubs Money Series | Western Asset vs. Money Market Obligations | Western Asset vs. Franklin Government Money | Western Asset vs. Blackrock Exchange Portfolio |
| Templeton Developing vs. Templeton Foreign Fund | Templeton Developing vs. Franklin Mutual Global | Templeton Developing vs. Templeton Growth Fund | Templeton Developing vs. Franklin Small Mid Cap |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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