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

0.92

Correlation Coefficient

Sentinel Balanced  Touchstone Focused

Almost no diversification

The 3 months correlation between Sentinel and Touchstone is 0.92. 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 is expected to generate 1.66 times less return on investment than Touchstone Focused. But when comparing it to its historical volatility, Sentinel Balanced Fund is 1.53 times less risky than Touchstone Focused. It trades about 0.12 of its potential returns per unit of risk. Touchstone Focused Fund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7,256  in Touchstone Focused Fund on August 30, 2024 and sell it today you would earn a total of  414.00  from holding Touchstone Focused Fund or generate 5.71% return on investment over 90 days.

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

Sentinel Balanced Fund  vs.  Touchstone Focused Fund

Sentinel Balanced

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sentinel Balanced Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential 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

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Focused Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.