Correlation Between Chestnut Street and Touchstone Small

Can any of the company-specific risk be diversified away by investing in both Chestnut Street and Touchstone Small 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 Chestnut Street and Touchstone Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chestnut Street Exchange and Touchstone Small Cap, you can compare the effects of market volatilities on Chestnut Street and Touchstone Small 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 Chestnut Street with a short position of Touchstone Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chestnut Street and Touchstone Small.

Diversification Opportunities for Chestnut Street and Touchstone Small

0.93

Correlation Coefficient

Chestnut Street  Touchstone Small

Almost no diversification

The 3 months correlation between Chestnut and Touchstone is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Chestnut Street Exchange and Touchstone Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Small Cap and Chestnut Street 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 Chestnut Street Exchange are associated (or correlated) with Touchstone Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Small Cap has no effect on the direction of Chestnut Street i.e., Chestnut Street and Touchstone Small go up and down completely randomly.

Pair Corralation between Chestnut Street and Touchstone Small

Assuming the 90 days horizon Chestnut Street Exchange is expected to generate 0.76 times more return on investment than Touchstone Small. However, Chestnut Street Exchange is 1.32 times less risky than Touchstone Small. It trades about -0.28 of its potential returns per unit of risk. Touchstone Small Cap is currently generating about -0.31 per unit of risk. If you would invest  117,580  in Chestnut Street Exchange on October 9, 2024 and sell it today you would lose (4,997) from holding Chestnut Street Exchange or give up 4.25% of portfolio value over 90 days.

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

Chestnut Street Exchange  vs.  Touchstone Small Cap

Chestnut Street Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chestnut Street Exchange has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Chestnut Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Touchstone Small Cap

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Touchstone Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Touchstone Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chestnut Street and Touchstone Small

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

The idea behind Chestnut Street Exchange and Touchstone Small Cap 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.