Correlation Between Intermediate Government and Touchstone Sands

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

By analyzing existing cross correlation between Intermediate Government Bond and Touchstone Sands Capital, you can compare the effects of market volatilities on Intermediate Government and Touchstone Sands 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 Intermediate Government with a short position of Touchstone Sands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate Government and Touchstone Sands.

Diversification Opportunities for Intermediate Government and Touchstone Sands

0.12

Correlation Coefficient

Intermediate Government  Touchstone Sands

Average diversification

The 3 months correlation between Intermediate and Touchstone is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Government Bond and Touchstone Sands Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Sands Capital and Intermediate Government 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 Intermediate Government Bond are associated (or correlated) with Touchstone Sands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Sands Capital has no effect on the direction of Intermediate Government i.e., Intermediate Government and Touchstone Sands go up and down completely randomly.

Pair Corralation between Intermediate Government and Touchstone Sands

Assuming the 90 days horizon Intermediate Government Bond is expected to generate 0.05 times more return on investment than Touchstone Sands. However, Intermediate Government Bond is 18.23 times less risky than Touchstone Sands. It trades about -0.26 of its potential returns per unit of risk. Touchstone Sands Capital is currently generating about -0.14 per unit of risk. If you would invest  949.00  in Intermediate Government Bond on October 7, 2024 and sell it today you would lose (4.00) from holding Intermediate Government Bond or give up 0.42% of portfolio value over 90 days.

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

Intermediate Government Bond  vs.  Touchstone Sands Capital

Intermediate Government

Risk-Adjusted Performance

0 of 100

Very Weak

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

Touchstone Sands Capital

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Sands Capital are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Touchstone Sands may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Intermediate Government and Touchstone Sands

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

The idea behind Intermediate Government Bond and Touchstone Sands Capital 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.