Correlation Between Sentinel Small and Touchstone Focused

Can any of the company-specific risk be diversified away by investing in both Sentinel Small 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 Small 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 Small Pany and Touchstone Focused Fund, you can compare the effects of market volatilities on Sentinel Small 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 Small with a short position of Touchstone Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sentinel Small and Touchstone Focused.

Diversification Opportunities for Sentinel Small and Touchstone Focused

0.35

Correlation Coefficient

Sentinel Small  Touchstone Focused

Weak diversification

The 3 months correlation between Sentinel and Touchstone is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Small Pany 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 Small 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 Small Pany 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 Small i.e., Sentinel Small and Touchstone Focused go up and down completely randomly.

Pair Corralation between Sentinel Small and Touchstone Focused

Assuming the 90 days horizon Sentinel Small Pany is expected to under-perform the Touchstone Focused. In addition to that, Sentinel Small is 1.51 times more volatile than Touchstone Focused Fund. It trades about -0.19 of its total potential returns per unit of risk. Touchstone Focused Fund is currently generating about 0.01 per unit of volatility. If you would invest  7,655  in Touchstone Focused Fund on November 28, 2024 and sell it today you would earn a total of  14.00  from holding Touchstone Focused Fund or generate 0.18% return on investment over 90 days.

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

Sentinel Small Pany  vs.  Touchstone Focused Fund

Sentinel Small Pany

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sentinel Small Pany 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 basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund 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 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 Small and Touchstone Focused

The main advantage of trading using opposite Sentinel Small and Touchstone Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sentinel Small 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 Small Pany 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.