Correlation Between Swan Defined and Touchstone Ultra

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

By analyzing existing cross correlation between Swan Defined Risk and Touchstone Ultra Short, you can compare the effects of market volatilities on Swan Defined and Touchstone Ultra 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 Swan Defined with a short position of Touchstone Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swan Defined and Touchstone Ultra.

Diversification Opportunities for Swan Defined and Touchstone Ultra

-0.61

Correlation Coefficient

Swan Defined  Touchstone Ultra

Excellent diversification

The 3 months correlation between Swan and Touchstone is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Swan Defined Risk and Touchstone Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Ultra Short and Swan Defined 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 Swan Defined Risk are associated (or correlated) with Touchstone Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Ultra Short has no effect on the direction of Swan Defined i.e., Swan Defined and Touchstone Ultra go up and down completely randomly.

Pair Corralation between Swan Defined and Touchstone Ultra

Assuming the 90 days horizon Swan Defined Risk is expected to under-perform the Touchstone Ultra. In addition to that, Swan Defined is 27.14 times more volatile than Touchstone Ultra Short. It trades about -0.29 of its total potential returns per unit of risk. Touchstone Ultra Short is currently generating about -0.33 per unit of volatility. If you would invest  925.00  in Touchstone Ultra Short on October 9, 2024 and sell it today you would lose (2.00) from holding Touchstone Ultra Short or give up 0.22% of portfolio value over 90 days.

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

Swan Defined Risk  vs.  Touchstone Ultra Short

Swan Defined Risk

Risk-Adjusted Performance

0 of 100

Very Weak

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

Touchstone Ultra Short

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Ultra Short are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Touchstone Ultra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Swan Defined and Touchstone Ultra

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

The idea behind Swan Defined Risk and Touchstone Ultra Short 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.