Correlation Between Sentinel Balanced and Touchstone Focused

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

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

Diversification Opportunities for Sentinel Balanced and Touchstone Focused

0.97

Correlation Coefficient

Sentinel Balanced  Touchstone Focused

Almost no diversification

The 3 months correlation between Sentinel and Touchstone is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Balanced Fund and Touchstone Focused Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Focused and Sentinel Balanced 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 Balanced Fund 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 Sentinel Balanced i.e., Sentinel Balanced and Touchstone Focused go up and down completely randomly.

Pair Corralation between Sentinel Balanced and Touchstone Focused

Assuming the 90 days horizon Sentinel Balanced Fund is expected to under-perform the Touchstone Focused. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sentinel Balanced Fund is 1.4 times less risky than Touchstone Focused. The mutual fund trades about 0.0 of its potential returns per unit of risk. The Touchstone Focused Fund is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,613  in Touchstone Focused Fund on November 28, 2024 and sell it today you would earn a total of  9.00  from holding Touchstone Focused Fund or generate 0.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.31%
Values	Daily Returns

Sentinel Balanced Fund  vs.  Touchstone Focused Fund

Sentinel Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sentinel Balanced Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Sentinel Balanced 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 Sentinel Balanced and Touchstone Focused

The main advantage of trading using opposite Sentinel Balanced and Touchstone Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sentinel Balanced 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 Sentinel Balanced Fund 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.