Correlation Between Touchstone Large and Sentinel Common

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

Diversification Opportunities for Touchstone Large and Sentinel Common

0.55

Correlation Coefficient

Touchstone Large  Sentinel Common

Very weak diversification

The 3 months correlation between Touchstone and Sentinel is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Large Cap 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 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 Sentinel Common. 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 Large i.e., Touchstone Large and Sentinel Common go up and down completely randomly.

Pair Corralation between Touchstone Large and Sentinel Common

Assuming the 90 days horizon Touchstone Large Cap is expected to under-perform the Sentinel Common. But the mutual fund apears to be less risky and, when comparing its historical volatility, Touchstone Large Cap is 1.03 times less risky than Sentinel Common. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Sentinel Mon Stock is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  7,275  in Sentinel Mon Stock on December 1, 2024 and sell it today you would lose (38.00) from holding Sentinel Mon Stock or give up 0.52% of portfolio value over 90 days.

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

Touchstone Large Cap  vs.  Sentinel Mon Stock

Touchstone Large Cap

Risk-Adjusted Performance

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 forward indicators, Touchstone Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sentinel Mon Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sentinel Mon Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sentinel Common 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 Sentinel Common

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

The idea behind Touchstone Large Cap 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.