Correlation Between Touchstone Small and Invesco Balanced

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

By analyzing existing cross correlation between Touchstone Small Cap and Invesco Balanced Risk Modity, you can compare the effects of market volatilities on Touchstone Small and Invesco 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 Small with a short position of Invesco Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and Invesco Balanced.

Diversification Opportunities for Touchstone Small and Invesco Balanced

-0.31

Correlation Coefficient

Touchstone Small  Invesco Balanced

Very good diversification

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

Pair Corralation between Touchstone Small and Invesco Balanced

Assuming the 90 days horizon Touchstone Small Cap is expected to generate 1.02 times more return on investment than Invesco Balanced. However, Touchstone Small is 1.02 times more volatile than Invesco Balanced Risk Modity. It trades about -0.19 of its potential returns per unit of risk. Invesco Balanced Risk Modity is currently generating about -0.23 per unit of risk. If you would invest  4,010  in Touchstone Small Cap on September 20, 2024 and sell it today you would lose (177.00) from holding Touchstone Small Cap or give up 4.41% of portfolio value over 90 days.

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

Touchstone Small Cap  vs.  Invesco Balanced Risk Modity

Touchstone Small Cap

Risk-Adjusted Performance

0 of 100

Insignificant

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

Invesco Balanced Risk

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Touchstone Small Cap and Invesco Balanced Risk Modity 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.