Correlation Between T Rowe and Touchstone Focused

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

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

Diversification Opportunities for T Rowe and Touchstone Focused

0.21

Correlation Coefficient

T Rowe  Touchstone Focused

Modest diversification

The 3 months correlation between PATFX and Touchstone is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Touchstone Focused Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Focused and T Rowe 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 T Rowe Price are associated (or correlated) with Touchstone Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Focused has no effect on the direction of T Rowe i.e., T Rowe and Touchstone Focused go up and down completely randomly.

Pair Corralation between T Rowe and Touchstone Focused

Assuming the 90 days horizon T Rowe Price is expected to generate 0.27 times more return on investment than Touchstone Focused. However, T Rowe Price is 3.74 times less risky than Touchstone Focused. It trades about -0.02 of its potential returns per unit of risk. Touchstone Focused Fund is currently generating about -0.06 per unit of risk. If you would invest  1,106  in T Rowe Price on December 30, 2024 and sell it today you would lose (3.00) from holding T Rowe Price or give up 0.27% of portfolio value over 90 days.

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

T Rowe Price  vs.  Touchstone Focused Fund

T Rowe Price

Risk-Adjusted Performance

Very Weak

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

Touchstone Focused

Risk-Adjusted Performance

Very Weak

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

Pair Trading with T Rowe and Touchstone Focused

The main advantage of trading using opposite T Rowe and Touchstone Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe position performs unexpectedly, Touchstone Focused 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 Focused will offset losses from the drop in Touchstone Focused's long position.

The idea behind T Rowe Price and Touchstone Focused 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.