Correlation Between Touchstone Premium and Sierra Tactical

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

By analyzing existing cross correlation between Touchstone Premium Yield and Sierra Tactical Municipal, you can compare the effects of market volatilities on Touchstone Premium and Sierra Tactical 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 Premium with a short position of Sierra Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Premium and Sierra Tactical.

Diversification Opportunities for Touchstone Premium and Sierra Tactical

0.31

Correlation Coefficient

Touchstone Premium  Sierra Tactical

Weak diversification

The 3 months correlation between Touchstone and Sierra is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Premium Yield and Sierra Tactical Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Tactical Municipal and Touchstone Premium 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 Premium Yield are associated (or correlated) with Sierra Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Tactical Municipal has no effect on the direction of Touchstone Premium i.e., Touchstone Premium and Sierra Tactical go up and down completely randomly.

Pair Corralation between Touchstone Premium and Sierra Tactical

Assuming the 90 days horizon Touchstone Premium Yield is expected to generate 3.32 times more return on investment than Sierra Tactical. However, Touchstone Premium is 3.32 times more volatile than Sierra Tactical Municipal. It trades about 0.05 of its potential returns per unit of risk. Sierra Tactical Municipal is currently generating about 0.0 per unit of risk. If you would invest  871.00  in Touchstone Premium Yield on September 3, 2024 and sell it today you would earn a total of  23.00  from holding Touchstone Premium Yield or generate 2.64% return on investment over 90 days.

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

Touchstone Premium Yield  vs.  Sierra Tactical Municipal

Touchstone Premium Yield

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Premium Yield are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Touchstone Premium is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sierra Tactical Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sierra Tactical Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Sierra Tactical 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 Premium and Sierra Tactical

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

The idea behind Touchstone Premium Yield and Sierra Tactical Municipal 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.