Correlation Between Templeton China and Wasatch Greater

Can any of the company-specific risk be diversified away by investing in both Templeton China and Wasatch Greater 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 China and Wasatch Greater into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Templeton China World and Wasatch Greater China, you can compare the effects of market volatilities on Templeton China and Wasatch Greater 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 China with a short position of Wasatch Greater. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton China and Wasatch Greater.

Diversification Opportunities for Templeton China and Wasatch Greater

0.97

Correlation Coefficient

Templeton China  Wasatch Greater

Almost no diversification

The 3 months correlation between Templeton and Wasatch is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Templeton China World and Wasatch Greater China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Greater China and Templeton China 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 China World are associated (or correlated) with Wasatch Greater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Greater China has no effect on the direction of Templeton China i.e., Templeton China and Wasatch Greater go up and down completely randomly.

Pair Corralation between Templeton China and Wasatch Greater

Assuming the 90 days horizon Templeton China World is expected to generate 1.42 times more return on investment than Wasatch Greater. However, Templeton China is 1.42 times more volatile than Wasatch Greater China. It trades about -0.03 of its potential returns per unit of risk. Wasatch Greater China is currently generating about -0.05 per unit of risk. If you would invest  1,135  in Templeton China World on February 28, 2024 and sell it today you would lose (371.00) from holding Templeton China World or give up 32.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Templeton China World  vs.  Wasatch Greater China

Templeton China World

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Templeton China World are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Templeton China may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Wasatch Greater China

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Greater China are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Wasatch Greater may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Templeton China and Wasatch Greater

The main advantage of trading using opposite Templeton China and Wasatch Greater positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Templeton China position performs unexpectedly, Wasatch Greater 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 Wasatch Greater will offset losses from the drop in Wasatch Greater's long position.

The idea behind Templeton China World and Wasatch Greater China 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.