Correlation Between Touchstone Large and Great-west

Can any of the company-specific risk be diversified away by investing in both Touchstone Large and Great-west 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 Great-west 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 Great West Sp 500, you can compare the effects of market volatilities on Touchstone Large and Great-west 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 Great-west. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Large and Great-west.

Diversification Opportunities for Touchstone Large and Great-west

0.5

Correlation Coefficient

Touchstone Large  Great-west

Very weak diversification

The 3 months correlation between Touchstone and Great-west is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Large Cap and Great West Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Sp 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 Great-west. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Sp has no effect on the direction of Touchstone Large i.e., Touchstone Large and Great-west go up and down completely randomly.

Pair Corralation between Touchstone Large and Great-west

Assuming the 90 days horizon Touchstone Large Cap is expected to generate 0.79 times more return on investment than Great-west. However, Touchstone Large Cap is 1.27 times less risky than Great-west. It trades about -0.01 of its potential returns per unit of risk. Great West Sp 500 is currently generating about -0.11 per unit of risk. If you would invest  1,968  in Touchstone Large Cap on December 24, 2024 and sell it today you would lose (9.00) from holding Touchstone Large Cap or give up 0.46% of portfolio value over 90 days.

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

Touchstone Large Cap  vs.  Great West Sp 500

Touchstone Large Cap

Risk-Adjusted Performance

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.

Great West Sp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great West Sp 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Touchstone Large and Great-west

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

The idea behind Touchstone Large Cap and Great West Sp 500 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.