Correlation Between Touchstone Total and Touchstone Small

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

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

Diversification Opportunities for Touchstone Total and Touchstone Small

0.1

Correlation Coefficient

Touchstone Total  Touchstone Small

Average diversification

The 3 months correlation between Touchstone and Touchstone is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Total Return and Touchstone Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Small Cap and Touchstone Total 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 Total Return are associated (or correlated) with Touchstone Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Small Cap has no effect on the direction of Touchstone Total i.e., Touchstone Total and Touchstone Small go up and down completely randomly.

Pair Corralation between Touchstone Total and Touchstone Small

Assuming the 90 days horizon Touchstone Total Return is expected to generate 0.24 times more return on investment than Touchstone Small. However, Touchstone Total Return is 4.13 times less risky than Touchstone Small. It trades about -0.58 of its potential returns per unit of risk. Touchstone Small Cap is currently generating about -0.32 per unit of risk. If you would invest  909.00  in Touchstone Total Return on October 10, 2024 and sell it today you would lose (26.00) from holding Touchstone Total Return or give up 2.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Touchstone Total Return  vs.  Touchstone Small Cap

Touchstone Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Touchstone Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchstone Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Touchstone Small 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 Total and Touchstone Small

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

The idea behind Touchstone Total Return and Touchstone Small 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.