Correlation Between Touchstone Focused and Sentinel Balanced

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

Diversification Opportunities for Touchstone Focused and Sentinel Balanced

0.89

Correlation Coefficient

Touchstone Focused  Sentinel Balanced

Very poor diversification

The 3 months correlation between Touchstone and Sentinel is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Focused Fund and Sentinel Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentinel Balanced 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 Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentinel Balanced has no effect on the direction of Touchstone Focused i.e., Touchstone Focused and Sentinel Balanced go up and down completely randomly.

Pair Corralation between Touchstone Focused and Sentinel Balanced

Assuming the 90 days horizon Touchstone Focused Fund is expected to generate 1.4 times more return on investment than Sentinel Balanced. However, Touchstone Focused is 1.4 times more volatile than Sentinel Balanced Fund. It trades about 0.0 of its potential returns per unit of risk. Sentinel Balanced Fund is currently generating about 0.0 per unit of risk. If you would invest  7,503  in Touchstone Focused Fund on November 28, 2024 and sell it today you would earn a total of  3.00  from holding Touchstone Focused Fund or generate 0.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.31%
Values	Daily Returns

Touchstone Focused Fund  vs.  Sentinel Balanced Fund

Touchstone Focused

Risk-Adjusted Performance

Weak

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

Sentinel Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sentinel Balanced Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Sentinel Balanced 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 Focused and Sentinel Balanced

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

The idea behind Touchstone Focused Fund and Sentinel Balanced Fund 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.