Correlation Between Sentinel Balanced and Touchstone International

Can any of the company-specific risk be diversified away by investing in both Sentinel Balanced and Touchstone International 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 International 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 International Equity, you can compare the effects of market volatilities on Sentinel Balanced and Touchstone International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sentinel Balanced and Touchstone International.

Diversification Opportunities for Sentinel Balanced and Touchstone International

-0.23

Correlation Coefficient

Sentinel Balanced  Touchstone International

Very good diversification

The 3 months correlation between Sentinel and Touchstone is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Balanced Fund and Touchstone International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone International has no effect on the direction of Sentinel Balanced i.e., Sentinel Balanced and Touchstone International go up and down completely randomly.

Pair Corralation between Sentinel Balanced and Touchstone International

Assuming the 90 days horizon Sentinel Balanced Fund is expected to under-perform the Touchstone International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sentinel Balanced Fund is 1.38 times less risky than Touchstone International. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Touchstone International Equity is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,370  in Touchstone International Equity on December 29, 2024 and sell it today you would earn a total of  206.00  from holding Touchstone International Equity or generate 15.04% return on investment over 90 days.

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

Sentinel Balanced Fund  vs.  Touchstone International Equit

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 International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone International Equity are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Touchstone International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sentinel Balanced and Touchstone International

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

The idea behind Sentinel Balanced Fund and Touchstone International Equity 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.