Correlation Between Touchstone Focused and Sentinel Mon

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

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

Diversification Opportunities for Touchstone Focused and Sentinel Mon

1.0

Correlation Coefficient

Touchstone Focused  Sentinel Mon

No risk reduction

The 3 months correlation between Touchstone and Sentinel is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Focused Fund and Sentinel Mon Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentinel Mon Stock and Touchstone Focused 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 Focused Fund are associated (or correlated) with Sentinel Mon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentinel Mon Stock has no effect on the direction of Touchstone Focused i.e., Touchstone Focused and Sentinel Mon go up and down completely randomly.

Pair Corralation between Touchstone Focused and Sentinel Mon

Assuming the 90 days horizon Touchstone Focused is expected to generate 1.01 times less return on investment than Sentinel Mon. But when comparing it to its historical volatility, Touchstone Focused Fund is 1.03 times less risky than Sentinel Mon. It trades about 0.19 of its potential returns per unit of risk. Sentinel Mon Stock is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6,738  in Sentinel Mon Stock on September 2, 2024 and sell it today you would earn a total of  539.00  from holding Sentinel Mon Stock or generate 8.0% return on investment over 90 days.

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

Touchstone Focused Fund  vs.  Sentinel Mon Stock

Touchstone Focused

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Focused Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Touchstone Focused may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sentinel Mon Stock

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sentinel Mon Stock are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Sentinel Mon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Touchstone Focused and Sentinel Mon

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

The idea behind Touchstone Focused Fund and Sentinel Mon Stock 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.