Correlation Between Short Nasdaq and Touchstone Premium

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

By analyzing existing cross correlation between Short Nasdaq 100 Profund and Touchstone Premium Yield, you can compare the effects of market volatilities on Short Nasdaq and Touchstone Premium 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 Short Nasdaq with a short position of Touchstone Premium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Nasdaq and Touchstone Premium.

Diversification Opportunities for Short Nasdaq and Touchstone Premium

0.51

Correlation Coefficient

Short Nasdaq  Touchstone Premium

Very weak diversification

The 3 months correlation between Short and Touchstone is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Short Nasdaq 100 Profund and Touchstone Premium Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Premium Yield and Short Nasdaq 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 Short Nasdaq 100 Profund are associated (or correlated) with Touchstone Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Premium Yield has no effect on the direction of Short Nasdaq i.e., Short Nasdaq and Touchstone Premium go up and down completely randomly.

Pair Corralation between Short Nasdaq and Touchstone Premium

Assuming the 90 days horizon Short Nasdaq 100 Profund is expected to under-perform the Touchstone Premium. In addition to that, Short Nasdaq is 1.27 times more volatile than Touchstone Premium Yield. It trades about -0.13 of its total potential returns per unit of risk. Touchstone Premium Yield is currently generating about -0.15 per unit of volatility. If you would invest  910.00  in Touchstone Premium Yield on October 4, 2024 and sell it today you would lose (103.00) from holding Touchstone Premium Yield or give up 11.32% of portfolio value over 90 days.

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

Short Nasdaq 100 Profund  vs.  Touchstone Premium Yield

Short Nasdaq 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Nasdaq 100 Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Touchstone Premium Yield

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Short Nasdaq and Touchstone Premium

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

The idea behind Short Nasdaq 100 Profund and Touchstone Premium Yield 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.