Correlation Between Touchstone Large and Western Asset

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

Diversification Opportunities for Touchstone Large and Western Asset

-0.32

Correlation Coefficient

Touchstone Large  Western Asset

Very good diversification

The 3 months correlation between Touchstone and Western is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Large Cap and Western Asset Adjustable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Adjustable 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Adjustable has no effect on the direction of Touchstone Large i.e., Touchstone Large and Western Asset go up and down completely randomly.

Pair Corralation between Touchstone Large and Western Asset

Assuming the 90 days horizon Touchstone Large Cap is expected to generate 7.31 times more return on investment than Western Asset. However, Touchstone Large is 7.31 times more volatile than Western Asset Adjustable. It trades about 0.09 of its potential returns per unit of risk. Western Asset Adjustable is currently generating about 0.27 per unit of risk. If you would invest  1,971  in Touchstone Large Cap on October 26, 2024 and sell it today you would earn a total of  19.00  from holding Touchstone Large Cap or generate 0.96% return on investment over 90 days.

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

Touchstone Large Cap  vs.  Western Asset Adjustable

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.

Western Asset Adjustable

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Adjustable are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Western Asset 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 Western Asset

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

The idea behind Touchstone Large Cap and Western Asset Adjustable 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.