Correlation Between American Funds and Touchstone Value

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

By analyzing existing cross correlation between American Funds American and Touchstone Value Fund, you can compare the effects of market volatilities on American Funds and Touchstone Value 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 American Funds with a short position of Touchstone Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Touchstone Value.

Diversification Opportunities for American Funds and Touchstone Value

0.89

Correlation Coefficient

American Funds  Touchstone Value

Very poor diversification

The 3 months correlation between American and Touchstone is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Touchstone Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Value and American Funds 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 American Funds American are associated (or correlated) with Touchstone Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Value has no effect on the direction of American Funds i.e., American Funds and Touchstone Value go up and down completely randomly.

Pair Corralation between American Funds and Touchstone Value

Assuming the 90 days horizon American Funds is expected to generate 3.18 times less return on investment than Touchstone Value. But when comparing it to its historical volatility, American Funds American is 1.22 times less risky than Touchstone Value. It trades about 0.06 of its potential returns per unit of risk. Touchstone Value Fund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,232  in Touchstone Value Fund on September 13, 2024 and sell it today you would earn a total of  83.00  from holding Touchstone Value Fund or generate 6.74% return on investment over 90 days.

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

American Funds American  vs.  Touchstone Value Fund

American Funds American

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds American are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Touchstone Value

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Value Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Touchstone Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with American Funds and Touchstone Value

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

The idea behind American Funds American and Touchstone Value Fund 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.