Correlation Between Touchstone Large and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Touchstone Large and Mid Cap 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 Mid Cap 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 Mid Cap Value, you can compare the effects of market volatilities on Touchstone Large and Mid Cap 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 Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Large and Mid Cap.
Diversification Opportunities for Touchstone Large and Mid Cap
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Touchstone and Mid is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Large Cap and Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value 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 Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Value has no effect on the direction of Touchstone Large i.e., Touchstone Large and Mid Cap go up and down completely randomly.
Pair Corralation between Touchstone Large and Mid Cap
Assuming the 90 days horizon Touchstone Large Cap is expected to generate 0.64 times more return on investment than Mid Cap. However, Touchstone Large Cap is 1.56 times less risky than Mid Cap. It trades about -0.04 of its potential returns per unit of risk. Mid Cap Value is currently generating about -0.12 per unit of risk. If you would invest 1,924 in Touchstone Large Cap on October 4, 2024 and sell it today you would lose (38.00) from holding Touchstone Large Cap or give up 1.98% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Touchstone Large Cap vs. Mid Cap Value
Performance |
Timeline |
Touchstone Large Cap |
Mid Cap Value |
Touchstone Large and Mid Cap Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Touchstone Large and Mid Cap
The main advantage of trading using opposite Touchstone Large and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Large position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.Touchstone Large vs. Franklin Moderate Allocation | Touchstone Large vs. Alternative Asset Allocation | Touchstone Large vs. Siit Large Cap | Touchstone Large vs. Guidemark Large Cap |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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