Correlation Between Touchstone Large and Fidelity Large

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

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

Diversification Opportunities for Touchstone Large and Fidelity Large

0.68

Correlation Coefficient

Touchstone Large  Fidelity Large

Poor diversification

The 3 months correlation between Touchstone and Fidelity is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Large Cap and Fidelity Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Large Cap and Touchstone Large 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 Touchstone Large Cap are associated (or correlated) with Fidelity Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Large Cap has no effect on the direction of Touchstone Large i.e., Touchstone Large and Fidelity Large go up and down completely randomly.

Pair Corralation between Touchstone Large and Fidelity Large

Assuming the 90 days horizon Touchstone Large is expected to generate 4.42 times less return on investment than Fidelity Large. But when comparing it to its historical volatility, Touchstone Large Cap is 1.0 times less risky than Fidelity Large. It trades about 0.03 of its potential returns per unit of risk. Fidelity Large Cap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,514  in Fidelity Large Cap on October 24, 2024 and sell it today you would earn a total of  106.00  from holding Fidelity Large Cap or generate 7.0% return on investment over 90 days.

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

Touchstone Large Cap  vs.  Fidelity Large Cap

Touchstone Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchstone Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Touchstone Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Large Cap

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Large Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Fidelity Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Touchstone Large and Fidelity Large

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

The idea behind Touchstone Large Cap and Fidelity Large Cap 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .