Correlation Between Touchstone Sands and Blackrock Midcap

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

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

Diversification Opportunities for Touchstone Sands and Blackrock Midcap

0.94

Correlation Coefficient

Touchstone Sands  Blackrock Midcap

Almost no diversification

The 3 months correlation between Touchstone and Blackrock is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Sands Capital and Blackrock Midcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Midcap Index and Touchstone Sands 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 Touchstone Sands Capital are associated (or correlated) with Blackrock Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Midcap Index has no effect on the direction of Touchstone Sands i.e., Touchstone Sands and Blackrock Midcap go up and down completely randomly.

Pair Corralation between Touchstone Sands and Blackrock Midcap

Assuming the 90 days horizon Touchstone Sands Capital is expected to under-perform the Blackrock Midcap. In addition to that, Touchstone Sands is 1.9 times more volatile than Blackrock Midcap Index. It trades about -0.07 of its total potential returns per unit of risk. Blackrock Midcap Index is currently generating about -0.08 per unit of volatility. If you would invest  1,509  in Blackrock Midcap Index on December 24, 2024 and sell it today you would lose (69.00) from holding Blackrock Midcap Index or give up 4.57% of portfolio value over 90 days.

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

Touchstone Sands Capital  vs.  Blackrock Midcap Index

Touchstone Sands Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Touchstone Sands Capital has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Blackrock Midcap Index

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Touchstone Sands and Blackrock Midcap

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

The idea behind Touchstone Sands Capital and Blackrock Midcap Index 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.