Correlation Between Templeton Dragon and Nuveen Missouri

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

By analyzing existing cross correlation between Templeton Dragon Closed and Nuveen Missouri Quality, you can compare the effects of market volatilities on Templeton Dragon and Nuveen Missouri 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 Dragon with a short position of Nuveen Missouri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Templeton Dragon and Nuveen Missouri.

Diversification Opportunities for Templeton Dragon and Nuveen Missouri

-0.54

Correlation Coefficient

Templeton Dragon  Nuveen Missouri

Excellent diversification

The 3 months correlation between Templeton and Nuveen is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Templeton Dragon Closed and Nuveen Missouri Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Missouri Quality and Templeton Dragon 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 Dragon Closed are associated (or correlated) with Nuveen Missouri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Missouri Quality has no effect on the direction of Templeton Dragon i.e., Templeton Dragon and Nuveen Missouri go up and down completely randomly.

Pair Corralation between Templeton Dragon and Nuveen Missouri

Considering the 90-day investment horizon Templeton Dragon Closed is expected to generate 1.08 times more return on investment than Nuveen Missouri. However, Templeton Dragon is 1.08 times more volatile than Nuveen Missouri Quality. It trades about 0.01 of its potential returns per unit of risk. Nuveen Missouri Quality is currently generating about -0.1 per unit of risk. If you would invest  820.00  in Templeton Dragon Closed on January 8, 2025 and sell it today you would earn a total of  1.00  from holding Templeton Dragon Closed or generate 0.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Templeton Dragon Closed  vs.  Nuveen Missouri Quality

Templeton Dragon Closed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Templeton Dragon Closed has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable fundamental indicators, Templeton Dragon is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Nuveen Missouri Quality

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Missouri Quality has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Pair Trading with Templeton Dragon and Nuveen Missouri

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

The idea behind Templeton Dragon Closed and Nuveen Missouri Quality 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.