Correlation Between Sentinel Small and Touchstone Value

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

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

Diversification Opportunities for Sentinel Small and Touchstone Value

0.86

Correlation Coefficient

Sentinel Small  Touchstone Value

Very poor diversification

The 3 months correlation between Sentinel and Touchstone is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Small Pany and Touchstone Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Value and Sentinel Small 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 Sentinel Small Pany 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 Sentinel Small i.e., Sentinel Small and Touchstone Value go up and down completely randomly.

Pair Corralation between Sentinel Small and Touchstone Value

Assuming the 90 days horizon Sentinel Small Pany is expected to generate 1.56 times more return on investment than Touchstone Value. However, Sentinel Small is 1.56 times more volatile than Touchstone Value Fund. It trades about 0.16 of its potential returns per unit of risk. Touchstone Value Fund is currently generating about 0.24 per unit of risk. If you would invest  610.00  in Sentinel Small Pany on September 4, 2024 and sell it today you would earn a total of  65.00  from holding Sentinel Small Pany or generate 10.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Sentinel Small Pany  vs.  Touchstone Value Fund

Sentinel Small Pany

Risk-Adjusted Performance

12 of 100

Good

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

Touchstone Value

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Value Fund are ranked lower than 18 (%) 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 Sentinel Small and Touchstone Value

The main advantage of trading using opposite Sentinel Small and Touchstone Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sentinel Small 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 Sentinel Small Pany 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.